Suppose the government decides,in the interest of "fairness," to impose a policy prohibiting factor-price differentials.The likely result would be
A)a horizontal factor supply curve.
B)a decrease in net factor demands.
C)an increase in factor mobility.
D)a shortage of factors in uses with low net advantage.
E)equilibrium in factor markets.

Question

Quizplus · Accepted Answer

Prohibiting factor-price differentials would remove the incentive for factors to move from low-value uses to high-value uses, resulting in a shortage of factors in uses with low net advantage. This is because the prices of factors (labor, capital, etc.) are determined by supply and demand, and if the government artificially sets them equal, the market mechanism is distorted, leading to inefficiency and shortages.

Suppose the Government Decides,in the Interest of "Fairness," to Impose