Why Do Shortages Develop Under a Binding Price Ceiling

question 55

Multiple Choice

Why do shortages develop under a binding price ceiling?

• A) It encourages sellers to produce more of the product.
• B) It encourages buyers to purchase less of the product.
• C) It makes the price so low that the quantity demanded exceeds the quantity supplied in the legal market.
• D) It makes the price so low that the quantity demanded exceeds the quantity supplied on the black market.
• E) It encourages sellers to increase the quality of the product they sell, which, in turn, increases the quantity demanded.

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