If the government implements a binding price ceiling on insulin,this will
A)increase the price consumers will pay for insulin.
B)decrease the quantity of insulin the manufacturers will be willing to supply.
C)have to be set above the market equilibrium price to be effective.
D)encourage manufacturers to produce and sell more insulin to increase their profits.

Question

Quizplus · Accepted Answer

If a binding price ceiling is implemented on insulin, it means that the government is setting a maximum price that insulin can be sold for. However, if this price is set below the market equilibrium price, it will create a shortage of insulin because suppliers will not be willing to produce or supply as much insulin due to the price constraint. Therefore, the quantity of insulin available to consumers will decrease. Additionally, if the price ceiling is binding, it cannot be set above the market equilibrium price as it would have no impact. As for option A, it is not correct because a price ceiling would prevent the price from increasing beyond a certain level. Finally, option D is also not correct because price ceilings usually discourage manufacturers from producing and selling more products due to lower profitability.

If the Government Implements a Binding Price Ceiling on Insulin,this