(Figure: Understanding Price Ceilings and Floors) In the graph, if the government sets a maximum price of $25, this is an example of a binding price ceiling.

Question

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A binding price ceiling occurs when the government sets a maximum price below the equilibrium price, which leads to a shortage. In the graph provided, if the maximum price is set at $25, it is below the equilibrium price of $30, and therefore a binding price ceiling.

(Figure: Understanding Price Ceilings and Floors) in the Graph, If