FIGURE 5-1
-Refer to Figure 5-1. To be binding, a legal price ceiling must lie
A) above P0 but below P2.
B) anywhere above P0.
C) below P0 but above P3.
D) anywhere below P0.
E) anywhere above 0.

Question

FIGURE 5-1
-Refer to Figure 5-1. To be binding, a legal price ceiling must lie
A) above P0 but below P2. 
B) anywhere above P0. 
C) below P0 but above P3. 
D) anywhere below P0. 
E) anywhere above 0.

Quizplus · Accepted Answer

A binding price ceiling must be set below the equilibrium price (P0) to be effective, as it restricts the price from reaching the equilibrium level.

FIGURE 5-1 -Refer to Figure 5-1. to Be Binding, a Legal Price