Which of the Following Functions Is Not Performed by Prices

question 125

Multiple Choice

Which of the following functions is not performed by prices in a free market?

• A)guiding the allocation of resources 
• B)conveying information about the marginal cost of production 
• C)making the distribution of income more equitable 
• D)replacing the need for governmental supervision of production

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Definitions:

Shortage

A market condition where demand exceeds supply.

Surplus

A situation where the quantity of a good or service supplied exceeds the quantity demanded, often resulting in excess stock and potential price reductions.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product or service, intending to protect consumers from excessive prices.

Price Floor

A price floor is a government- or authority-imposed minimum price set above the equilibrium price, preventing the market price from falling below it.