Government officials who impose price controls
A) understand that their action causes a trade-off: giving up fairness to get efficiency.
B) understand that their action will induce a better achievement of the gains from trade.
C) understand that their action is supported by most economists,and hence best for society.
D) might not understand that their action causes confusion in the price signaling mechanism that directs the allocation of resources.
E) might not understand that their action will not get them the votes they seek.

Question

Quizplus · Accepted Answer

Price controls can cause confusion in the price signaling mechanism because they distort the true market price, leading to misallocation of resources. Government officials who impose price controls may not fully understand the unintended consequences of their actions.

Government Officials Who Impose Price Controls