Price Controls Cause Resources to Be Misallocated By

question 2

Multiple Choice

Price controls cause resources to be misallocated by:

• A)distorting the signals of suppliers' willingness to supply and eliminating the incentives for demanders to pay.
• B)distorting the signals of demanders' willingness to pay and eliminating the incentives for suppliers to supply.(True Answer
• )Correct
• C)distorting the incentives for suppliers to supply and eliminating the signals of demanders' willingness to
• pay.
• D)distorting the incentives for demanders to pay and eliminating the signals of suppliers' willingness to
• Supply.

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Definitions:

Compounded annually

Interest calculated once a year on the principal amount of an investment, including any interest from previous periods.

Foreclosure action

A legal process in which a lender seeks to recover the balance of a loan from a borrower who has stopped making payments, typically by selling the property used as collateral.

Purchase price

The price at which an item or property is bought.

Conditional sale contract

A sales agreement that transfers ownership of an item to the buyer only after specific conditions are met, usually full payment of the purchase price.