What happens when government imposes price ceilings and floors in a market

Question

Quizplus · Accepted Answer

When government imposes price ceilings and floors in a market, the price no longer serves as a rationing device. This means that the price does not reflect the supply and demand equilibrium, leading to shortages and surpluses in the market. This can cause inefficiencies and distortions in the market, which can ultimately harm both buyers and sellers. Therefore, choice A is the correct answer. Choices B, C, and D are all incorrect because they suggest positive outcomes, which are not necessarily true in these circumstances.

What Happens When Government Imposes Price Ceilings and Floors in a Market