Which of the following statements best describes the effects of price controls?
A) They always lower the price.
B) They efficiently allocate resources.
C) They always benefit those that the price is trying to help.
D) They distort market prices.

Question

Quizplus · Accepted Answer

Price controls, whether they are price floors or price ceilings, create a distortion in the marketplace. For example, price ceilings prevent the price from rising above a certain level, which can create a shortage of goods or services that people want, as suppliers may not be willing to produce them at the controlled price. On the other hand, a price floor can create a surplus of goods or services, as suppliers produce more than consumers want to buy at the mandated price. Overall, price controls result in market inefficiencies that can negatively impact both consumers and producers.

Which of the Following Statements Best Describes the Effects of Price