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If the equilibrium price for a product is $100, a price ceiling of $140 will result in

A. A surplus of the product
B. No impact on the market
C. A shortage of the product
D. Increased production of the product

1 Answer

3 votes

Final answer:

A price ceiling of $140 on a product with an equilibrium price of $100 will have no impact on the market, as it is set above the equilibrium price and does not constrain market transactions at that price level.

Step-by-step explanation:

If the equilibrium price for a product is $100, and a price ceiling of $140 is set, this will result in No impact on the market. This is because a price ceiling is only effective if it is set below the market's equilibrium price. Since the imposed price ceiling of $140 is above the equilibrium price, it will not restrict the market, and goods can still be sold at the equilibrium price where quantity demanded equals quantity supplied. As a result, there will not be a surplus or shortage of the product, nor will there be an incentive for increased production.

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