Price Ceilings and Allocative Efficiency
In a perfectly competitive market, what is the effect on allocative efficiency of a price ceiling set below the equilibrium price?
A
Price ceilings do not alter allocative efficiency if all markets adjust accordingly.
B
Allocative efficiency improves as consumers can afford more units at lower prices.
C
Allocative efficiency decreases as quantity demanded exceeds quantity supplied creating shortages.
D
Producers become more efficient under pressure leading to an outward shift in the PPC eventually.
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