Refer to the information provided in Figure 4.3 below to answer the question(s) that follow. Figure 4.3
-Refer to Figure 4.3. If the government will not allow retailers to charge more than $0.40 for a pencil, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40.
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
D) The market will be in equilibrium at a price of $0.40.

Question

Refer to the information provided in Figure 4.3 below to answer the question(s) that follow.  Figure 4.3
-Refer to Figure 4.3. If the government will not allow retailers to charge more than $0.40 for a pencil, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40. 
B) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40. 
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils. 
D) The market will be in equilibrium at a price of $0.40.

Quizplus · Accepted Answer

When a price ceiling (a maximum price set by the government) is imposed below the equilibrium price, it typically results in a shortage because the quantity demanded exceeds the quantity supplied at that price. Nonprice rationing mechanisms, such as queuing, are often needed to distribute the limited supply.

Refer to the Information Provided in Figure 4