In a competitive market,a price ceiling set below the free-market equilibrium price will result in
A)a continuation of the free-market equilibrium price and quantity.
B)the quantity demanded exceeding quantity supplied and thus a shortage in the market.
C)the quantity supplied exceeding quantity demanded and thus a surplus in the market.
D)a new free-market equilibrium at a lower price and higher output level.
E)excess supply.

Question

Quizplus · Accepted Answer

When a price ceiling is set below the free-market equilibrium price, the quantity demanded by consumers will increase while the quantity supplied by sellers will decrease. This creates a shortage in the market, where the quantity demanded exceeds the quantity supplied. Thus, option B is the correct choice.

In a Competitive Market,a Price Ceiling Set Below the Free-Market