Legal limits on prices will tend to cause misallocation of resources because
A)the market price does not reflect the costs of production.
B)people are unable to determine their preferences at the high or low price.
C)producers are able to produce less efficiently.
D)consumers no longer have incentive to spend their income efficiently.
E)All of these responses are correct.

Question

Quizplus · Accepted Answer

Legal limits on prices, such as price ceilings or floors, can lead to a situation where the market price does not reflect the true costs of production, causing resources to be misallocated as supply and demand are not balanced.

Legal Limits on Prices Will Tend to Cause Misallocation of Resources