When prices of products are set below equilibrium,
A) society's resources are inefficiently allocated.
B) firms expand output to increase profits.
C) firms earn excessively high profits.
D) consumers benefit from surpluses of cheap goods.

Question

Quizplus · Accepted Answer

When prices are set below equilibrium, it leads to a shortage, not a surplus, as demand exceeds supply. This results in inefficient allocation of resources as not all consumers can obtain the product, and firms do not expand output due to the lower price.

When Prices of Products Are Set Below Equilibrium