Economics Perfect Competition Questions
In monopolistic competition, a price ceiling refers to a government-imposed maximum price that can be charged for a particular good or service. This policy is implemented to protect consumers by ensuring that prices do not exceed a certain level. The price ceiling is typically set below the equilibrium price, which can lead to a shortage of the product in the market. While it may benefit consumers by making the product more affordable, it can also have negative consequences such as reduced quality, black market activities, and decreased incentives for producers to supply the product.