Do Price Ceilings Misallocate Resources

question 81

Multiple Choice

Do price ceilings misallocate resources?

• A) Yes, because people who value the good the most are unable to bid it away from low-valued uses.
• B) Yes, because people who value the good the least are unable to afford the good.
• C) No, because the good is still allocated based on willingness to pay.
• D) No, because the rich and poor alike stand an equal chance in getting the good.

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Definitions:

Variable Cost

An expense that changes in proportion to the production output or sales of a company.

Activity Variance

The difference between the expected activity level and the actual activity level, often analyzed in budgeting and variance analysis.

Net Operating Income

A company's revenue minus its operating expenses, not including taxes and interest.

Service Company

A business that provides intangible products or services to customers, as opposed to selling physical goods.