Government policies such as price controls, rent controls, and quantity restrictions have the effect of
A) promoting the attainment of an unhindered market equilibrium.
B) allowing quantity demanded to adjust to equality with aggregate supply.
C) creating excess quantities demanded or excess quantities supplied.
D) pushing prices to market clearing levels more rapidly than private market forces.

Question

Quizplus · Accepted Answer

Government policies such as price controls, rent controls, and quantity restrictions lead to market distortions and can create either excess quantities demanded or excess quantities supplied. This is because these policies artificially manipulate supply or demand, thereby interfering with the market's natural balance. As a result, the market cannot fully clear and achieve an equilibrium price and quantity.

Government Policies Such as Price Controls, Rent Controls, and Quantity