If the government removes a binding price ceiling from a market, then the price received by sellers will
A)decrease, and the quantity sold in the market will decrease
B)decrease, and the quantity sold in the market will increase.
C)decrease, and the quantity sold in the market will increase
D)increase, and the quantity sold in the market will increase.

Question

If the government removes a binding price ceiling from a market, then the price received by sellers will
A)​decrease, and the quantity sold in the market will decrease
B)​decrease, and the quantity sold in the market will increase.
C)​decrease, and the quantity sold in the market will increase
D)​increase, and the quantity sold in the market will increase.

Quizplus · Accepted Answer

When a binding price ceiling (a maximum legal price below the equilibrium price) is removed, the price received by sellers increases because the market moves towards the equilibrium price, which is higher. This also typically results in an increase in the quantity sold as the market reaches a new equilibrium where quantity supplied equals quantity demanded at a higher price.

If the Government Removes a Binding Price Ceiling from a Market