Price ceilings:
A) improve the allocation of resources because consumers with the greatest need for the product are more likely to afford the product.
B) misallocate resources because consumers who buy the product may not be the ones who value it the most.
C) misallocate resources because they allow consumers to compete against one another by offering sellers higher prices.
D) improve the allocation of resources because consumers are prevented from bidding up the price of products.

Question

Quizplus · Accepted Answer

Price ceilings misallocate resources because they create a shortage of the product, which enables consumers to buy the product at a lower price than the market equilibrium. This allows consumers who may not necessarily value the product as much as others to purchase it, while those who do value it may not be able to afford it, leading to a misallocation of resources.

Price Ceilings