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The correct statement about the
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Explanation of Solution
A price ceiling is a method used by the government to set the price of a product or service in the market. Purchasing or selling that product below that price would be a punishable act.
The government usually sets the price ceiling below the equilibrium price to safeguard the interest of some consumers, but such price-controlling methods result in various types of inefficiencies in the market like inefficient allocation of sales, a persistent shortage of products, black-marketing, wastage of resources, and a temptation for corruption and bribery in the economy. Despite the various inefficiencies, the price ceiling benefits some consumers.
In New York City, the government sets a price ceiling on many food items after WWII to protect the interest of suppliers in the market.
Therefore, option “e” or “all of the above” is correct.
Chapter 8 Solutions
Krugman's Economics For The Ap® Course
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