Price Controls Will Tend to Cause Misallocation of Resources Because

question 19

Multiple Choice

Price controls will tend to cause misallocation of resources because

• A) production (or opportunity) cost no longer corresponds to market price.
• B) people are unable to determine their preferences at the high or low price.
• C) producers no longer have incentive to be profitable.
• D) consumers no longer have incentive to spend their income efficiently.

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Definitions:

Government Standards

Regulations established by the government to dictate the minimum acceptable levels of safety, quality, or performance for products, services, or actions.

Emission Reductions

The process or policy of reducing the amount of pollutants released into the atmosphere, typically to combat pollution and climate change.

Externality Compensation

Payments or remedies provided to offset the unintended negative or positive effects imposed on third parties by the production or consumption of goods and services.

Efficient Outcome

An allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off.