In an Effort to Fight Inflation of 18 Percent Per

question 91

Multiple Choice

In an effort to fight inflation of 18 percent per year in Venezuela, President Hugo Chávez has instituted price controls on most basic foodstuffs. Which of the following is the likely outcome of these price controls?

• A) Demand for food will increase due to the lower prices.
• B) Firms will produce less of the price-controlled items and produce more of other items.
• C) Lower prices will cause the supply curve to shift left, reducing the equilibrium quantity.
• D) The relative price of food will increase, stimulating increased production.

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