Refer to the information provided in Figure 4.3 below to answer the questions that follow. Figure 4.3
-Refer to Figure 4.3. If the government will not allow the retailers to charge more than $0.40 for a pencil, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40.
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
D) The market will be in equilibrium at a price of $0.40.

Question

Refer to the information provided in Figure 4.3 below to answer the questions that follow.  Figure 4.3
-Refer to Figure 4.3. If the government will not allow the retailers to charge more than $0.40 for a pencil, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40. 
B) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40. 
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils. 
D) The market will be in equilibrium at a price of $0.40.

Quizplus · Accepted Answer

If the price is capped at $0.40 and this is below the equilibrium price, a shortage will occur, necessitating a nonprice rationing system like queuing to allocate the limited supply.

Refer to the Information Provided in Figure 4