In a Market Where Government Has Set the Maximum Price

question 98

Multiple Choice

In a market where government has set the maximum price below the equilibrium price, one might expect:

• A)quantity demanded to equal quantity supplied.
• B)excess supply.
• C)a black market to develop as individuals try to take advantage of unexploited opportunities.
• D)quantity supplied to surpass quantity demanded.

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Definitions:

Redistribution of Income

The transfer of income from certain individuals or groups to others through mechanisms like taxes and social security payments, aiming to reduce economic inequality.

Utilitarians

Individuals or philosophers who believe that the best action is the one that maximizes utility, often defined as maximizing happiness and reducing suffering.

Sum of Utilities

The aggregate measure of satisfaction or benefit that individuals get from consuming goods and services.

Liberalism

The political philosophy according to which the government should choose policies deemed just, as evaluated by an impartial observer behind a “veil of ignorance”.