Which of the following statements about a binding price ceiling is true ?
Correct answer: D. The shortage created by the price ceiling is greater in the long run than in the short run
- A. The shortage created by the price ceiling is greater in the short ran than in the long run.
- B. The surplus created by the price ceiling is greater in the short run than in the long run
- C. The surplus created by the price ceiling is greater in the long run than in the short run
- D. The shortage created by the price ceiling is greater in the long run than in the short run
Explanation
A binding ceiling creates a shortage, and both demand and supply generally become more responsive over time. Therefore, the shortage is greater in the long run than in the short run.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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