Price ceilings often generate
A) market clearing prices.
B) rapid increases in supply to meet the excess demand.
C) equilibriums that utilize rationing by price.
D) black markets.

Question

Quizplus · Accepted Answer

Price ceilings create a situation where the legally determined maximum price is below the market equilibrium price. This leads to excess demand, which creates shortages. The shortages and excess demand create an incentive for buyers and sellers to engage in black markets, where goods are traded at prices above the legal maximum.

Price Ceilings Often Generate