What is the long-run consequence of a price ceiling law?
A) A surplus will continue to exist and will grow larger over time.
B) A surplus will continue to exist and will grow smaller over time.
C) A shortage will continue to exist and will grow larger over time.
D) A shortage will continue to exist and will grow smaller over time.
E) The amount of the surplus will not change.

Question

Quizplus · Accepted Answer

A price ceiling sets a maximum price that producers are allowed to charge for a good or service. If the price ceiling is set below the equilibrium price, a shortage will exist. In the long run, producers may exit the market or reduce production, exacerbating the shortage. Consumers may also increase demand, worsening the shortage further. Therefore, a shortage will continue to exist and will grow larger over time.

What Is the Long-Run Consequence of a Price Ceiling Law