Legal Limits on Prices Will Tend to Cause Misallocation of Resources

question 167

Multiple Choice

Legal limits on prices will tend to cause misallocation of resources because

• A)production (or opportunity) cost no longer corresponds to market price.
• B)people are unable to determine their preferences at the high or low price.
• C)producers no longer have incentive to be profitable.
• D)consumers no longer have incentive to spend their income efficiently.
• E)All of the above are correct.

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Definitions:

Technological Improvement

Innovations and advancements in technology that enhance productivity, efficiency, or the quality of goods and services.

Wage Increase

An upward adjustment in the amount of money paid to an employee for their labor.

Workers' Union

An organization that represents the collective interests of employees, negotiating wages, work hours, and working conditions with employers.

Relative Price

The price of one good or service compared to another, usually considered in terms of opportunity cost.