Impeding price signals by imposing price ceilings can have serious consequences. Which of the following is such a consequence?
A) improved product quality
B) gains from trade
C) surpluses
D) misallocation of resources

Question

Quizplus · Accepted Answer

When price ceilings are introduced, they lead to a shortage of products in the market as the demand for the product at the given price increases. This leads to a misallocation of resources, as suppliers are forced to ration the limited quantity of goods available. Furthermore, the goods that are being sold (at the ceiling price) may not truly reflect the product's value or the costs involved in their production, and suppliers may face financial losses as a result. All of these factors can have serious consequences for the market and lead to a misallocation of resources.

Impeding Price Signals by Imposing Price Ceilings Can Have Serious