Price Ceiling Creates Shortage

Steps:

• Market equilibrium occurs where supply equals demand at the equilibrium price.
• A maximum price (price ceiling) below equilibrium reduces the price firms receive.
• At this lower price, quantity demanded exceeds quantity supplied.
• The result is a shortage, where not all demand can be met.

Why A is correct:

• A price ceiling below equilibrium causes excess demand, leading to a shortage where some consumers cannot purchase masks at the set price (law of supply and demand).

Why the others are wrong:

• B: Firms produce fewer masks due to lower incentives, worsening the shortage.
• C: Shortage means no group, including poorer consumers, gets all needed masks without rationing.
• D: Market does not clear; excess demand persists.

Final answer: A