Price ceilings reduce quality because:
A) buyers are willing to accept lower quality of goods with lower prices.
B) facing excess demand sellers cannot raise prices to increase profit.
C) the law would mandate the quality of goods to match the price of the goods.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

When price ceilings are in place and demand exceeds supply, sellers cannot raise prices to increase profits. This creates a situation where sellers may decrease quality to maintain profitability. This is known as the quality reduction effect. Therefore, option B is correct as it explains how price ceilings lead to a reduction in quality. The other options are either irrelevant or incorrect.

Price Ceilings Reduce Quality Because