in order to be binding, a price ceiling\na. must be high enough for firms to earn a profit.\nb. must lie…
in order to be binding, a price ceiling\na. must be high enough for firms to earn a profit.\nb. must lie below the free market equilibrium price.\nc. must coincide with the free market equilibrium price.\nd. must lie above the free market equilibrium price.
Answer
Brief Explanations:
A binding price - ceiling is a legal maximum price. If it is set above the free - market equilibrium price, it will not be binding as the market will operate at the equilibrium. Only when the price ceiling is set below the free - market equilibrium price does it have an impact on the market, creating a shortage.
Answer:
B. must lie below the free market equilibrium price.