Suppose Congress imposes a price ceiling of $5 per ATM transaction. If the average market-clearing price for an ATM transaction is $2, then:
A)there will be excess demand in the market.
B)the price ceiling will not be binding.
C)there will be excess supply in the market.
D)the supply price will be higher than the demand price.

Question

Quizplus · Accepted Answer

Since the market-clearing price is $2, which is below the imposed price ceiling of $5, the price ceiling does not affect the market operations. It is not binding because the market price is already lower than the ceiling.

Suppose Congress Imposes a Price Ceiling of $5 Per ATM