Which statement illustrates what an effective price ceiling does to a market price?

Question

Quizplus · Accepted Answer

An effective price ceiling puts a maximum limit on the price that sellers can charge for a good or service. This limit is usually set below the equilibrium price. The equilibrium price is the price at which the quantity demanded by buyers and the quantity supplied by sellers are in balance, without any shortage or surplus. When a price ceiling is set below the equilibrium price, it creates a shortage of the good or service, as the amount supplied is less than the amount demanded. This shortage leads to market inefficiencies, such as long waiting lines, rationing, black markets, or decreased quality. The comparison with a helium balloon and a room ceiling emphasizes how the ceiling prevents the price from rising to its natural level, while the comparison with an equilibrium price shows the distortion created by the ceiling. Choices B, C, and D are incorrect because they either invert the effect of the ceiling, confuse it with a price floor, or suggest that the ceiling can have random outcomes.

Which Statement Illustrates What an Effective Price Ceiling Does to a Market