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Question

Suppose Kate lives in a community with no price controls. What could she expect will happen if her town borders a community where there is a nonbinding price ceiling on most products?

a. Legal market prices will rise in the community with a binding price ceiling.

b. Legal market prices will fall in the community with a binding price ceiling.

c. The price and the quantity sold in the community without a nonbinding price ceiling will be the same as the price and quantity in the community with a nonbinding price ceiling.

d. There will be more shortages in the community with a binding price ceiling.

e. The black market in the community with a binding price ceiling will not be strong because consumers will simply purchase the product in the community that has no price ceiling.

Answer

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