A maximum price below the market equilibrium price will raise the total surplus of the market.

Question

Quizplus · Accepted Answer

When a maximum price is set below the market equilibrium price, it creates a shortage of goods or services as quantity demanded exceeds quantity supplied. This shortage results in inefficiencies such as inefficient allocation of resources, queues, black markets, and reduced quality of goods. Thus, a maximum price below the market equilibrium price does not raise the total surplus of the market.

A Maximum Price Below the Market Equilibrium Price Will Raise