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.

Question

Quizplus · Accepted Answer

Price controls distort the natural equilibrium of supply and demand, causing the market price to no longer reflect the true production or opportunity cost, leading to inefficient allocation of resources.

Price Controls Will Tend to Cause Misallocation of Resources Because