Price Ceiling Non-Binding Above Equilibrium

Steps:

• Excess supply at P_f indicates P_f exceeds equilibrium price (P_e), so quantity supplied > quantity demanded.
• A maximum price (ceiling) at P_f caps price at current level but allows it to fall if needed.
• Since P_f > P_e, the ceiling does not restrict price below P_f, making it non-binding.
• Market dynamics remain unchanged; excess supply persists without intervention.

Why C is correct:

• A price ceiling set at or above the current market price (with excess supply) is ineffective and alters nothing, per standard supply-demand law.

Why the others are wrong:

• A: Ceiling at P_f does not increase supply; it only limits upward price movement, irrelevant here.
• B: Market stays out of equilibrium; ceiling fails to adjust price downward to P_e.
• D: Excess demand arises only from ceilings below P_e; P_f > P_e prevents shortages.

Final answer: C