The government imposes a price ceiling on sugar that is above the market price. You are asked to suggest a rationing scheme that will minimize the misallocation of resources. You suggest
A) using rationing coupons that cannot be resold.
B) using rationing on a first-come, first-served basis.
C) using rationing coupons that can be resold.
D) that no rationing system will be necessary.

Question

Quizplus · Accepted Answer

Since the price ceiling is set above the market price, it will not be binding. The market can operate without any shortages, meaning there's no need for a rationing system to allocate sugar.

The Government Imposes a Price Ceiling on Sugar That Is