Government attempts to stabilize prices can:

Question

Quizplus · Accepted Answer

When government attempts to stabilize prices, it often results in decreasing total surplus. This is because artificially set prices can lead to either a shortage or a surplus of goods, reducing the overall welfare of society. Therefore option B is correct. Option A is not correct because if the market is already at equilibrium, government interventions are not needed. Option C is not correct because government interventions do not necessarily prove the usefulness of a central planner. Option D is not correct because in the long run, artificial price controls can lead to distorted market signals, forcing firms to reduce production or exit the market, leading to higher prices.

Government Attempts to Stabilize Prices Can