The major drawback of a price ceiling is:
A) it causes a surplus.
B) government regulations of this kind are difficult to enforce.
C) it causes a shortage.
D) none of the above; there is no drawback.

Question

Quizplus · Accepted Answer

A price ceiling sets a maximum price for a good or service, and if this price is set below the market equilibrium price, it creates a shortage because the quantity demanded exceeds the quantity supplied. This can lead to rationing, queuing, or black markets. While government regulations can be difficult to enforce, this is not the major drawback of a price ceiling. Similarly, a price ceiling would not cause a surplus, as this would imply that the quantity supplied exceeds the quantity demanded at the lower price, which is not the case. Therefore, the major drawback of a price ceiling is that it causes a shortage.

The Major Drawback of a Price Ceiling Is