Suppose You Live in a Community with No Price Controls

question 116

Multiple Choice

Suppose you live in a community with no price controls.What do you expect will happen if your town borders a community where there is a binding price ceiling on most products?

• A) Prices in the legal market in the community with a binding price ceiling will rise.
• B) Prices in the legal market in the community with a binding price ceiling will fall.
• C) There will be shortages in the community with a binding price ceiling.
• D) More consumers will purchase the product in the community with the price ceiling.
• E) The black market in your community will be larger than the black market in the community with the binding price ceiling.

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Definitions:

Purpose

The reason for which something is done or created or for which something exists.

Oligopoly

A market structure characterized by a small number of large firms dominating the industry, leading to limited competition.

Socially Efficient Quantity

The level of production of a good or service that results in the most beneficial mix of output for society, taking into account all costs and benefits.

Sellers

Individuals or entities that offer goods or services for sale to potential buyers in exchange for money or other assets.