An example of a binding price ceiling is:
A) a minimum wage law that is set above the equilibrium price.
B) rent control that is set above the equilibrium price.
C) a black market that sets the price below the equilibrium price.
D) a minimum wage law that is set below the equilibrium price.
E) rent control that is set below the equilibrium price.

Question

Quizplus · Accepted Answer

A binding price ceiling is a government-imposed limit on how high a price can be charged for a good. With rent control, the government sets a maximum price that landlords can charge for rent. If this price ceiling is set below the equilibrium price, it becomes binding and creates a shortage of rental units, meaning that some people who want to rent are unable to find a unit at the regulated price. Therefore, rent control that is set below the equilibrium price is an example of a binding price ceiling.

An Example of a Binding Price Ceiling Is