Government-imposed limits on price movements are likely to
A)increase economic efficiency.
B)decrease economic efficiency.
C)leave economic efficiency unchanged.
D)promote economic growth in the economy.

Question

Quizplus · Accepted Answer

Government-imposed limits on price movements, such as price ceilings or floors, create market distortions that result in decreased economic efficiency. Price ceilings, for instance, reduce the incentive to produce goods and services by keeping the price artificially low, leading to surpluses, supply shortages, and an inefficient allocation of resources. Price floors, on the other hand, artificially increase the price of goods and services, creating surpluses, reduced demand, and market inefficiencies. Overall, such controls interfere with market mechanisms that typically establish equilibrium prices, leading to inefficient markets, wasted resources, and ultimately lower economic growth.

Government-Imposed Limits on Price Movements Are Likely to