Suppose a Market Is Controlled by a Monopolist as Depicted

question 4

Multiple Choice

Suppose a market is controlled by a monopolist as depicted in the diagram below.P₁ represents the equilibrium price and P₂ a price ceiling set by law.Which of the following statements is true?

• A)The price ceiling will cause the equilibrium quantity to rise from Q₁ to Q₂.
• B)The price ceiling will create a surplus of Q₂ - Q₁.
• C)The price ceiling will create a shortage of Q₂ - Q₁.
• D)The price ceiling will create a shortage of Q₂ - Q₀.
• E)The market will still be in equilibrium at the lower price.

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