Concept:A maximum price fixed below the free market price is a price ceiling that creates a shortage, not a surplus.
Explanation:When the government fixes a maximum price below the equilibrium price, the legal price is lower than the market-clearing price.
At this lower price, the quantity demanded becomes greater than the quantity supplied.
This situation is called excess demand or shortage.
The shortage normally leads to black markets, hoarding, and rationing of available commodities.
However, excess supply occurs only when price is fixed above equilibrium, not below it.
Therefore, excess supply will not occur under a maximum price set below the free market price.
Answer:C. excess supply will occur