Which Statement About Price Controls Is Most Correct

question 268

Multiple Choice

Which statement about price controls is most correct?

• A) Price controls often hurt the people they are designed to help.
• B) Price controls always help the people they are designed to help.
• C) Price controls have minimal adverse effects.
• D) Price controls make economic sense even if they have adverse effects.

Comprehend the principles of supply and demand in determining wages and prices in competitive markets.

Grasp the economic rationale behind hiring or using more or less of a factor of production based on its MRP versus its cost.

Recognize the role of elasticity in supply and demand in determining the allocation and pricing of resources.

Understand the concept of pure rent and its relationship to factors of production in fixed supply.

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Definitions:

Principal-Agent Problem

An economic conflict where an individual (the agent) has the responsibility to act for the benefit of another party (the principal), but might fail to do so because of differing interests.

Representative Democracy

A form of government where citizens elect officials to represent their interests and make decisions on their behalf in the legislative process.

Private Business

A business entity owned and operated by private individuals, not controlled by the government, and aimed at earning profit.