Refer to Figure 4-18. In this market, which of the following price controls would be binding?

A) a price ceiling of $2.00, and it would cause a shortage
B) a price ceiling of $5.00, and it would cause a surplus
C) a price floor of $2.00, and it would cause a shortage
D) All of the above are correct.

Price Ceiling

A legal maximum price that can be charged for a good or service, typically set by the government to ensure affordability.

Price Floor

A government or regulatory-imposed minimum price for a good or service, intended to prevent prices from falling below a certain level.

Shortage

An instance where the need for a good or service surpasses its availability in the marketplace.