Price ceilings create five important effects:
A) shortages, reductions in product quality, wasteful lineups, a loss from gains to trade, and a misallocation of resources.
B) surpluses, increases in product quality, search costs, gains from trade, and resource attrition.
C) excess demand, long lines, poor service, efficiency, and arbitrage.
D) shortages, reduced time costs, low vacancy rates, blat, and deadweight loss.

Question

Quizplus · Accepted Answer

Price ceilings set a maximum legal price for a good or service, which can lead to shortages as demand exceeds supply at the artificially low price. This can result in a reduction in product quality as businesses struggle to produce at lower costs, wasteful lineups as consumers try to get the limited supply, a loss from gains to trade as some mutually beneficial transactions are prevented, and a misallocation of resources as businesses may choose to produce other goods that are not subject to price controls.

Price Ceilings Create Five Important Effects