Legal Limits on Prices Will Tend to Cause Misallocation of Resources

question 191

Multiple Choice

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

• A)the market price does not reflect the costs of production.
• B)people are unable to determine their preferences at the high or low price.
• C)producers are able to produce less efficiently.
• D)consumers no longer have incentive to spend their income efficiently.
• E)All of these responses are correct.

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Definitions:

Goods Sold

The total number of products or services that a company sells during a specific period.

Cash Balance

The amount of cash held by a company at a given point in time.

Minimum Cash Balance

The lowest amount of cash that a company aims to hold in its bank accounts at any time to meet routine operational expenses.

Cash Receipts

Money received by a business, including payments from customers, cash sales, and other sources of income.