Minimum and maximum price legislation is less likely to create shortages and surpluses than when using taxation and subsidies to correct an externality problem.

Question

Quizplus · Accepted Answer

Minimum and maximum price legislation (price floors and ceilings) directly sets prices above or below equilibrium, often leading to surpluses and shortages. In contrast, taxation and subsidies aim to correct externalities by altering costs or benefits, influencing supply and demand indirectly, and are less likely to cause such direct imbalances.

Minimum and Maximum Price Legislation Is Less Likely to Create