Exhibit 5-7 Refer to Exhibit 5-7.If the government were to remove a price ceiling of $2.00 per gallon in the milk market,the result would be:

Question

Exhibit 5-7  Refer to Exhibit 5-7.If the government were to remove a price ceiling of $2.00 per gallon in the milk market,the result would be:

Quizplus · Accepted Answer

The price ceiling, which is set below the equilibrium price, creates a shortage of milk in the market. Removing the price ceiling would allow the price to rise to the equilibrium level, resulting in an increase in both price and quantity of milk supplied as producers are incentivized to supply more milk at a higher price. The quantity of milk demanded may also increase as consumers may be willing to pay the higher price for the increased quantity available.