Question:
What effect was there on price and quantity when the government removed the maximum price? (Assumed Options: falls/rises, removes shortage/surplus)
Correct Answer:
(3)
Answer Explanation:
An effective maximum price (price ceiling) is set below the natural equilibrium, creating persistent excess demand (a shortage). When this artificial ceiling is removed, the market naturally pushes the price back up to equilibrium, thereby eliminating the shortage. (Correct option corresponds to: “rises… removes shortage”)
Topic: Price Controls Year: 2024
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