True or False? if supply increased enough, the price ceiling could become non-binding.

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Consider how a price ceiling works: it is binding when it is set below the market-clearing (equilibrium) price, creating a shortage. 
Option True: If supply increases substantially, the equilibrium price tends to fall because more quantity is available at each price. If the new equilibrium price falls below the existing price ceiling, then the ceiling sits above the going market price and becomes non-binding. In this scenario, the constraint no longer restricts the market price, and the ceiling has no practical effect. 
Option False: If we think of supply increases that do not push the equilibrium price below the ceiling, the ceiling would still restrict price behavior, remaining binding. This would occur if the ceiling remained below the new, still relatively high equilibrium price. 
To contrast, binding vs. non-binding hinges on the relation between the ceiling and the new equilibrium price after the supply shift. A sufficiently large increase in supply can indeed render the ceiling non-binding, but not every supply increase guarantees this; it depends on how far the equilibrium price moves relative to the ceiling. 
In summary, the statement is conditionally true: a large enough supply increase can make the price ceiling non-binding because the market-clearing price would fall below the ceiling, removing the binding constraint.

QAMO 2010-004 Fall 2025 Unit 9: Welfare Economics -- Application Problem

True or False? if supply increased enough, the price ceiling could become non-binding.

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Similar Questions

In this market, there will be excess demand of 39 . Ironically, the amount of natural gas used with the price ceiling will be less than the natural gas used if the price was allowed to rise to the market level.

True of Fase? If the demand increased enough, the price ceiling could become non-binding.

假设香蕉的均衡价格为 5 美元，并实施 7 美元的价格上限。这将导致：

Figure 6-2 Refer to Figure 6-2. The price ceiling causes quantity

A price ceiling is

A binding price ceiling hurts all producers who would have sold the good in a perfectly competitive market

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QAMO 2010-004 Fall 2025 Unit 9: Welfare Economics -- Application Problem

True or False? if supply increased enough, the price ceiling could become non-binding.

View Explanation

Log in for full answers

Similar Questions

In this market, there will be excess demand of 39 . Ironically, the amount of natural gas used with the price ceiling will be less than the natural gas used if the price was allowed to rise to the market level.

True of Fase? If the demand increased enough, the price ceiling could become non-binding.

假设香蕉的均衡价格为 5 美元，并实施 7 美元的价格上限。这将导致：

Figure 6-2 ​ Refer to Figure 6-2. The price ceiling causes quantity

A price ceiling is

A binding price ceiling hurts all producers who would have sold the good in a perfectly competitive market

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Figure 6-2 Refer to Figure 6-2. The price ceiling causes quantity