A price ceiling in a perfectly competitive market
A)leads to the same result as if the market were monopolized
B)results in a welfare loss
C)is effective only if it is set above the equilibrium price
D)may result from collusion among the firms selling in that market
E)may result from collusion among the consumers buying in that market

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a price ceiling below the equilibrium price leads to a shortage of the good or service. This can result in a welfare loss for both consumers and producers. Consumers may not be able to purchase the quantity they demand, while producers may not be able to sell as much as they would like to at a higher price. Therefore, a price ceiling in a perfectly competitive market is likely to result in a welfare loss.

A Price Ceiling in a Perfectly Competitive Market