Which of These Statements Explains Why Price Ceilings Result in Lost

question 250

Multiple Choice

Which of these statements explains why price ceilings result in lost gains from trade?

• A) Buyers and sellers want to trade, but the threat of fines or jail time prevents them from doing so.
• B) Sellers want to trade, but buyers prefer the lower prices.
• C) Buyers want to trade, but sellers are indifferent at the lower prices.
• D) Neither buyers nor sellers want to trade subject to a price ceiling resulting in lost gains from trade.

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Definitions:

Marginal Revenue Product

The boost in revenue achieved by adding one more unit of a factor involved in production.

Marginal Product

The additional output that results from using one more unit of a particular input, keeping other inputs constant.

Variable Input

Any resource used in production whose quantity can be changed in the short term to increase or decrease output.

Marginal Revenue Product Curve

A graphical representation showing how the additional revenue generated by employing one more unit of a resource varies with the quantity of the resource employed.