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:

Oil Prices

The cost per barrel of crude oil, which fluctuates based on global supply and demand dynamics, geopolitical factors, and market speculation.

Recession of 2001

A period of economic decline observed in 2001, marked by a decrease in industrial production, consumer spending, and several instances of bankruptcy, largely influenced by the bursting of the dot-com bubble.

Output

The aggregate output of goods and services generated by an economy.

Inflation Rate

The percentage rate at which the general level of prices for goods and services is rising, eroding purchasing power over time.