If the government sets a maximum price below the equilibrium price for milk, there will be a binding:
A)demand price.
B)supply price.
C)price floor.
D)price ceiling.

Question

Quizplus · Accepted Answer

When the government sets a maximum price below the equilibrium price for milk, it creates a price ceiling. A price ceiling is a type of price control that "ceils" the price level that can be charged for a good or service. If the price ceiling is set below the equilibrium price, it becomes a binding constraint that creates a shortage, as demand exceeds supply at the lower price.

If the Government Sets a Maximum Price Below the Equilibrium