In a competitive market,a legal price ceiling set above the free-market equilibrium price will result in
A)a continuation of the free-market equilibrium price and quantity.
B)the quantity demanded exceeding quantity supplied and thus a shortage in the market.
C)the quantity supplied exceeding quantity demanded and thus a surplus in the market.
D)a new free-market equilibrium at a higher price and lower output level.
E)increased profits to the firms in the industry.

Question

Quizplus · Accepted Answer

A price ceiling set above the equilibrium price is non-binding, meaning it does not affect the market, so the equilibrium price and quantity remain unchanged.

In a Competitive Market,a Legal Price Ceiling Set Above the Free-Market