A price ceiling set below an equilibrium price tends to cause persistent imbalances in the market because a. Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage. b. Quantity supplied exceeds quantity demanded but price cannot fall to remove the surplus. c. Quantity supplied exceeds quantity demanded but price cannot rise to remove the shortage. d. Quantity demanded exceeds quantity supplied but price cannot fall to remove the surplus.

a. Quantity demanded exceeds quantity supplied but price cannot rise to remove the shortage.

Explanation:

Price ceiling is the maximum amount that can be charged for a good or service. Price ceiling is usually set by the government or an agency of the government.

For price ceiling to be binding, it should be set below equilibrium price.

When there's a price ceiling below equilibrium price, quantity supplied would fall because market price is below equilibrium price. The fall in quantity supplied would lead to an excess of quantity demanded over supply and as a result there would be shortages.

Market forces cannot act to eliminate the shortage (increase the price) because of the price ceiling.

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