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:

Cosign

To sign a legal document alongside another person, taking joint responsibility for the obligation the document entails, such as a loan.

Equal Credit Opportunity Act

A U.S. federal law designed to ensure that all consumers have an equal chance to obtain credit, prohibiting discrimination.

Unauthorized Purchases

Transactions made without the permission of the account holder or beyond the scope of their authority.

Deceptive Claim

A false or misleading statement made about a product or service, typically for the purpose of deceiving consumers.