A shortage results when a
A)nonbinding price ceiling is imposed on a market.
B)nonbinding price ceiling is removed from a market.
C)binding price ceiling is imposed on a market.
D)binding price ceiling is removed from a market.

Question

Quizplus · Accepted Answer

A binding price ceiling is a maximum price that is legally imposed on a market, and it is below the equilibrium price. This means that suppliers cannot charge a price that is high enough to cover their costs and earn a profit, and consumers demand more than suppliers are willing to provide at that price. Therefore, a shortage results when a binding price ceiling is imposed on a market. Nonbinding price ceilings, whether imposed or removed, do not affect the market outcome because they do not constrain the price that suppliers and consumers agree upon.

A Shortage Results When a