A price ceiling imposed by the government ________.

Question

Quizplus · Accepted Answer

A price ceiling is a legal maximum price set by the government that a seller can charge for a good or service. If the price ceiling is below the market equilibrium price, it can create a situation of excess demand, where the quantity demanded exceeds the quantity supplied. This can lead to shortages, rationing, and black markets. Therefore, choice A is the best answer. 
B is incorrect because a price ceiling is not a tax but a restriction on prices.
C is incorrect because pricing a commodity above the market price is called price gouging, which is illegal in many jurisdictions.
D is incorrect because a price ceiling can exacerbate shortages or surpluses, rather than establish equilibrium.

A Price Ceiling Imposed by the Government ________