When Prices of Products Are Set Below Equilibrium

question 130

Multiple Choice

When prices of products are set below equilibrium,

• A) society's resources are inefficiently allocated.
• B) firms expand output to increase profits.
• C) firms earn excessively high profits.
• D) consumers benefit from surpluses of cheap goods.

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Definitions:

Scarcity

The limited availability of resources to meet unlimited wants and needs.

Economic Principle

A widely accepted generalization that guides the analysis of economics, helping to predict how economic agents will behave under certain conditions.

Incentives

Factors or stimuli that motivate or encourage individuals or entities to act in a certain way, often aimed at achieving a specific outcome or behavior.

Community

A group of people living in the same place or having a particular characteristic in common, or the feeling of fellowship with others due to shared attitudes, interests, and goals.