Question

141. If government set a maximum price of $45 in the above market:

A. a shortage of 21 units would arise.
B. a surplus of 21 units would arise.
C. a surplus of 40 units would arise.
D. it would create neither a shortage nor a surplus.

Answer 1

When the government sets a maximum price of $45 in the market, a shortage of 21 units would arise.

Step-by-step explanation:

The question refers to the concept of price controls. When the government sets a maximum price of $45 in the market, it creates a situation where the actual price is below the equilibrium price. In this case, option A is the correct answer: a shortage of 21 units would arise. This shortage occurs because the low price encourages buyers to demand more units than what suppliers are willing to supply at that price.