A price ceiling set below the equilibrium price will
A) clear the market for the good.
B) result in a shortage of the good.
C) result in a surplus of the good.
D) induce new firms to enter the industry.

Question

Quizplus · Accepted Answer

When a price ceiling is set below the equilibrium price, it means that the government is forcing the price to be lower than what the market would naturally choose. This creates an excess demand or a shortage of the good, as consumers are willing to buy more of the good at the lower price than producers are willing to supply. As a result, some consumers may be priced out of the market while producers may reduce their output or exit the market altogether. Therefore, a price ceiling set below the equilibrium price will result in a shortage of the good.

A Price Ceiling Set Below the Equilibrium Price Will