If a price ceiling is not binding,a.the equilibrium price is below the ceiling.b.it has no legal enforcement mechanism.c.the equilibrium price is above the ceiling.d.people must voluntarily agree to abide by it.
Question
If a price ceiling is not binding,a.the equilibrium price is below the ceiling.b.it has no legal enforcement mechanism.c.the equilibrium price is above the ceiling.d.people must voluntarily agree to abide by it.
Solution
The correct answer is a. The equilibrium price is below the ceiling.
Here's why:
A price ceiling is a government-imposed limit on how high a price can be charged for a product. If a price ceiling is not binding, it means that the government has set the maximum price (the ceiling) above the current equilibrium price in the market.
In this case, the market is allowed to behave as if there were no price ceiling because the equilibrium price (the price at which supply equals demand) is below the ceiling. Therefore, the price ceiling has no effect on the market.
The other options are incorrect because:
b. A price ceiling, whether binding or not, is a legal enforcement mechanism. It's a law that prevents sellers from charging more than a certain price.
c. If the equilibrium price were above the ceiling, the price ceiling would be binding. Sellers would want to charge a higher price, but the law would prevent them from doing so.
d. People don't voluntarily agree to abide by a price ceiling. It's a law imposed by the government, and sellers must abide by it whether they agree with it or not.
Similar Questions
If a price ceiling is binding: A. the equilibrium price is above the ceiling and there will be a shortage B. the equilibrium price is above the ceiling and there will be a surplus C. the equilibrium price is below the ceiling and there will be a surplus D. the equilibrium price is below the ceiling and there will be a shortage
Question 10If a price ceiling is imposed below the equilibrium price:1 pointsupply will increase above what it would be otherwise.demand will decrease below what it would be otherwise.the quantity supplied will be higher than it would be otherwise.the quantity demanded will be higher than it would be otherwise.
If a price ceiling is leading to a shortage then: A. the equilibrium price must be above the price ceiling B. supply must be greater than demand C. the equilibrium price must be below the price ceiling D. market forces will restore the price to equilibrium
Which of the following would you expect to see in a market with a binding (effective) price ceiling?Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aAll of the below.bSellers being able to pick-and-choose from among numerous willing buyers, perhaps deciding to sell only to friends or otherwise favored customerscCustomers lining up at stores long before they open for businessdBuyers illegally offering above-ceiling prices in an effort to entice sellers to sell to them.
Equilibrium occurs:Question 3Select one:a.at the lowest price consumers are willing to pay.b.at any price for which quantity demand is equal to quantity supply.c.at any price for which quantity demanded is less than the quantity supplied.d.at any price for which quantity demanded is greater than the quantity supplied.e.at the highest price consumers are willing to pay.
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