Assume an industry initially in equilibrium has a price ceiling imposed at a price below the equilibrium price. Total revenue received by the producers from sales will:
A)rise as a result.
B)rise as a result only if supply is inelastic.
C)rise as a result only if demand is inelastic.
D)fall as a result.

Question

Assume an industry initially in equilibrium has a price ceiling imposed at a price below the equilibrium price. Total revenue received by the producers from sales will:
A)​rise as a result.
B)​rise as a result only if supply is inelastic.
C)​rise as a result only if demand is inelastic.
D)​fall as a result.

Quizplus · Accepted Answer

When a price ceiling is imposed below the equilibrium price, it creates a situation where the quantity demanded exceeds the quantity supplied. This leads to shortages, and producers are not able to sell as much as they would at the equilibrium price. Therefore, total revenue received by the producers will fall as a result of the price ceiling.

Assume an Industry Initially in Equilibrium Has a Price Ceiling