The quantity sold in a market will decrease if the government

Question

Quizplus · Accepted Answer

If the government decreases a binding price ceiling in a market, it allows prices to increase to their market equilibrium level. This will incentivize producers to increase their production and supply more goods, leading to an increase in quantity sold in the market. Conversely, if the government decreases a binding price floor, it allows prices to fall to their market equilibrium level, which may lead to a decrease in quantity sold as some producers may no longer find it profitable to produce the good. Option C is incorrect because decreasing a tax on the good would make it cheaper for consumers, which would increase demand and therefore quantity sold.

The Quantity Sold in a Market Will Decrease If the Government