Suppose the market clearing price is $20 and the price ceiling is $15. The price that prevails in the market will be
A) $20.
B) $15.
C) less than $15.
D) $0.

Question

Quizplus · Accepted Answer

When the market clearing price is $20 but there is a price ceiling of $15, the price that prevails in the market will be the price ceiling of $15. This is because the price ceiling sets a legal maximum price that sellers are allowed to charge, and any price above this is illegal. Therefore, the market price cannot exceed the price ceiling of $15, and it will be the price that prevails in the market.

Suppose the Market Clearing Price Is $20 and the Price