If Prices Are Not Allowed to Rise Because of a Price

question 255

Multiple Choice

If prices are not allowed to rise because of a price ceiling, then:

• A) suppliers have an incentive to provide a high level of customer service.
• B) suppliers will compensate for the lower price by increasing the quality of their goods.
• C) prices do not provide the correct information about consumers' valuation of the good.
• D) a shortage will develop, but only temporarily until markets adjust to the lower prices.

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Definitions:

Causation

The relationship between an action and its effect, where the action is considered to be a contributing factor to the outcome or injury.

Negligence

The failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation, leading to harm or damage.

Res Ipsa Loquitur

A legal principle that infers negligence from the very nature of an accident or injury, in the absence of direct evidence on how any defendant behaved.

Plaintiff

An individual or entity who initiates a lawsuit against another party in a court of law.