The major drawback of a binding 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

The major drawback of a binding 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.

Quizplus · Accepted Answer

Binding price ceilings create a shortage in the market as the quantity demanded exceeds the quantity supplied at the mandated price. This can lead to inefficient market outcomes, such as decreased quality of goods, rationing, and black markets. Therefore, option A and D are incorrect. While government regulations may be difficult to enforce, it is not the major drawback of a binding price ceiling, making option B incorrect.

The Major Drawback of a Binding Price Ceiling Is