Final answer:
With a binding price ceiling, the price must remain constant to allocate the supply, and neither the supply nor demand curve is directly shifted. The largest effect occurs when the ceiling is substantially below the equilibrium price.
Step-by-step explanation:
With a binding price ceiling, the price is meant to remain constant to allocate the available supply, which means that answer C, Remain constant, is the correct choice. A price ceiling is a government-imposed limit on how high a price is charged for a product. Consequently, when set below the equilibrium price, a price ceiling prevents prices from rising to their equilibrium level, creating a shortage as demand exceeds supply at this artificially low price.
A price ceiling does not directly shift the supply or demand curve; however, it causes a disequilibrium in the market. The correct answer to which curve is shifted is D, neither. Generally, a binding price ceiling will have the largest effect if it is set substantially below the equilibrium price, because it causes the greatest discrepancy between the quantity demanded and the quantity supplied.