In an effort to get more Americans to drink milk, the government sets a price ceiling on milk that is substantially below the equilibrium price. Which of the following will occur? A. Production of milk will increase. B. There will be a shortage of milk. C. The demand for milk will shift to the right. D. Consumption of milk will increase.

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Macy

Business

15 August, 20:09

In an effort to get more Americans to drink milk, the government sets a price ceiling on milk that is substantially below the equilibrium price. Which of the following will occur? A. Production of milk will increase. B. There will be a shortage of milk. C. The demand for milk will shift to the right. D. Consumption of milk will increase.

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Answers (1)

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Cordova · Answer 1

B. There will be a shortage of milk.

Explanation:

Because of the set price ceiling by the government, suppliers will be discouraged from producing milk since the price ceiling is far below the equilibrium price. As a result, there will be decreased supply of milk since it will not be as profitable to produce. This will lead to a shortage of milk. Option B is the correct answer based on the above.