A government sets a maximum price below the equilibrium price. The likely result is
Answer and explanation
Correct answer: C. a shortage
- Step 1: At the lower price consumers want more and producers supply less. Answer: a shortage. Why not the others: a surplus: A price floor above equilibrium causes a surplus. a rise in supply: A lower price discourages producers. no change in the market: A binding maximum price changes the quantities.
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