Refer to Figure 6.4. Suppose that the market is currently in equilibrium and the government decides to impose a maximum price equal to price A in the graph. How will the equilibrium quantity and price change as a result of the price ceiling?
A. It won't. The price ceiling is above the equilibrium, so the market stays at equilibrium.
B. It will cause a shortage because at the price ceiling, the quantity demanded exceeds the quantity supplied.
C. It will cause a surplus because at the price ceiling, the quantity demanded is below the quantity supplied.
D. It won't. The price ceiling is below the equilibrium, so the market stays at equilibrium.
Answer: A
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