When the maximum price is fixed below the equilibrium price, which of the following occurs as a result? Excess supply Excess demand Black marketing
Both 2 and 3
When the maximum price (price ceiling) is set below the equilibrium price, the following happens:
Excess Demand: Since the price is low, more consumers want to buy the product, but producers are not willing to supply as much at the lower price, leading to a shortage.
Black Marketing: Due to the shortage, some sellers may illegally sell the product at higher prices.
Excess Supply would happen if the price is set above the equilibrium, not below.
Correct Answer: (3) Both 2 and 3
Similar Questions
The demand curve that a firm faces in a perfectly competitive market is perfectly _______________ ; it is a _____________straight line at the market price.
For a monopolist, profit is maximized at that level of output where:
Important Questions from Price determination under different market forms
‘Oligopoly’ refers to:
Which of the following statements are true regarding price and output determination under perfect competition?
A. A firm is a price taker
B. In the long run, a firm is in equilibrium when its AR = MR = LAC = LMC
C. A firm is in equilibrium in the short run only when its AC = AR = MR = MC
D. A firm reaches its shut-down point when price goes below its AC
E. A firm fixes the price of its products when AR = MR
Choose thecorrectanswer from the options given below:
Which of the following statements regarding price and output determination under monopoly are correct?
A. A monopoly firm can fix its price anywhere along its demand curve
B. Even during short run when a monopoly firm earns normal profit, it produces less than its optimum capacity
C. The slope of monopoly's MR curve is twice the slope of its AR curve
D. Price discrimination is possible only when demand curves are identical in two markets
E. Equilibrium price of a monopolist is always higher than that of a perfectly competitive firm.
Choose thecorrectanswer from the options given below:
Which of the following statements are false regarding price and output determination under perfect competition?
(A) A firm is a price taker
(B) In the long run. a firm is in equilibrium when its AR = MR = LAC = LMC
(C) A firm is in equilibrium in the short run only when its AC = AR = MR = MC
(D) A firm reaches its shut-down point when price goes below its AC
(E) A firm fixes the price of its products when AR = MR
Choose the most appropriate answer from the options given below:
The demand curve that a firm faces in a perfectly competitive market is perfectly _______________ ; it is a _____________straight line at the market price.
