Question

Suppose that the market equilibrium price for a good is $3.00. A nonbinding price ceiling in this market will result in a price set Choose one:A. below $3.00.B. above $3.00.C. More information is needed to determine the answer.D. at $3.00.

Answer 1

Answer:

A) below $3.00

Explanation:

In order for a price ceiling to be binding, it must be set below the market's equilibrium price. A binding price ceiling results in a supply shortage because the total quantity demanded will increase, while the total quantity supplied will decrease. The economic loss resulting from the shortage is known as deadweight loss.  

The deadweight loss is represented on the attached graph as the area below the demand curve and above the supply curve, and left of the equilibrium price.

Answer 2

Answer:

above $3.00

Explanation:

A price ceiling is when the government or an agency of the government sets the maximum price for a good or service. A price ceiling is non binding if it set above equilibrium price. So price above $3 is non binding. A non binding price ceiling has no effect on the market price.

Price ceiling is binding if it is set below equilibrium price.

Equilibrium price is where the demand and supply curve intersects.

I hope my answer helps you