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    Price Ceiling for Legal Prices

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    Price ceiling sets a maximum legal price that a seller may charge, typically placed below equilibrium. What do you think of a government placing a price ceiling the next time gasoline prices rise above $4.00 a gallon?

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    A price ceiling is an artificial cap on the price at some given point below the equilibrium price. This means that if markets were free to adjust to supply and demand, the price would increase to the equilibrium level.
    When a price ceiling is implemented, the quantity demanded is higher than the quantity supplied at ...

    Solution Summary

    The expert examines price ceilings for legal prices.