An effective price ceiling will

Question

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An effective price ceiling is a legally imposed maximum price that is below the market equilibrium price. This price ceiling will result in a product shortage because the quantity demanded will exceed the quantity supplied. As a result, consumers will be willing to pay the maximum price allowed by the price ceiling but suppliers will not be willing to produce and sell those goods at that price. Therefore, a shortage will occur where the quantity demanded exceeds the quantity supplied. The other options, inducing new firms to enter the industry, resulting in a product surplus, or clearing the market are not characteristics of an effective price ceiling.

An Effective Price Ceiling Will