A binding price ceiling will a. result in a product shortage. b. result in a product surplus. c. induce new firms to enter the industry. d. clear the market.
A binding price ceiling will a. result in a product shortage. b. result in a product surplus. c. induce new firms to enter the industry. d. clear the market.
Chapter4: Markets In Action
Section: Chapter Questions
Problem 3SQ
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A binding
a. result in a product shortage.
b. result in a product surplus.
c. induce new firms to enter the industry.
d. clear the market.
Expert Solution
Step 1
The price ceiling refers to a maximum-price that can be charged on a good service in the market, which is fixed by the government. A binding price ceiling happens when the government sets a required price on a good at a price below equilibrium, which foils an increase in the price of that good or service above the binding level.
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