Question

Suppose the government has imposed a price ceiling on laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding?
a. Improvements in production technology reduce the costs of producing laptop computers.
b. The number of firms selling laptop computers decreases.
c. Consumers' income decreases, and laptop computers are a normal good.
d. The number of consumers buying laptop computers decreases.

Answer 1

Answer:

b. The number of firms selling laptop computers decreases.

Explanation:

• As the government has implemented a price ceiling on the laptop computers the events that could trigger a transformation of the price would be a hold on the number of the firms that sell these laptops decrease as the result of the government cannot earn the maximum profits. As it forces the lower prices than the market prices and lesser quantity of the goods are sold.