Question

Suppose the government has imposed a price ceiling on sale of laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding?
A. The number of firms selling laptop computers decreases
B. Improvements in production technology reduce the costs of producing laptop computers
C. The number of consumers buying laptop computers decreases
D. Consumers' income decreases, and laptop computers are a normal good

Answer 1

Answer:

The correct answer is (A)

Explanation:

The price ceiling is a threshold price and consumers are not allowed to sell a product above that price. When the government impose price ceiling the profit of sellers usually decrease and sometimes the government provide subsidies to overcome those losses.  If the government impose a price ceiling on the sale of laptop computers the number of firms selling laptop decreases due to high competition and low profits.