When a binding price ceiling is imposed on a market,
A)price no longer serves as a rationing device.
B)the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling.
C)all potential buyers benefit.
D)All of the above are correct.

Question

When a binding price ceiling is imposed on a market,
A)​price no longer serves as a rationing device.
B)​the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling.
C)​all potential buyers benefit.
D)​All of the above are correct.

Quizplus · Accepted Answer

When a binding price ceiling is imposed on a market, the price is kept below the equilibrium price, which results in a shortage of goods or services. As a result, price can no longer serve as a rationing device, and sellers may resort to other methods such as first come, first served or favoritism. While it is possible that some buyers may benefit from a price ceiling, the overall impact is likely to be negative for both buyers and sellers in the long run. Therefore, options B and C are not correct.

When a Binding Price Ceiling Is Imposed on a Market