Suppose the current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4, the result of this policy would be

Question

Quizplus · Accepted Answer

If the government sets a maximum price of $4, this creates a binding price ceiling, which means that the price cannot rise above $4. At this lower price, the quantity demanded by consumers will exceed the quantity supplied by producers, leading to a shortage. Therefore, choice A is the correct answer. The other choices do not accurately capture the outcome of a price ceiling set below the equilibrium price.

Suppose the Current Equilibrium Price of Pizza Is $5