The government sets a price ceiling for health insurance premiums, which is below the equilibrium price....
The government sets a price ceiling for health insurance premiums, which is below the equilibrium price. As a result,
a. The health insurance market will be efficient.
b. A deadweight loss will be created.
c. An excess surplus of health insurance policies will be created.
d. The price ceiling will be ineffective.
e. None of the above answers is correct.
Homework Answers
Ans.- (B)
Price ceiling is a limit on a good's price about how high the price can be.
Setting a price ceiling below the equilibrium price is effective. It leads to shortage of health insurance policies. This shortage of health insurance policies will lead to deadweight loss.
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