Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It leads to increased allocative efficiency by ensuring lower prices for consumers.
B
It creates a deadweight loss due to reduced producer surplus and potential shortages.
C
It guarantees that all consumers can purchase goods at the market price.
D
It has no impact on market efficiency as demand remains unchanged.
Understanding the Answer
Let's break down why this is correct
Answer
A government-imposed price ceiling is a limit on how high a price can be charged for a product or service. This usually happens to make essential goods more affordable, like food or rent. However, when prices are kept too low, it can lead to shortages because suppliers may not want to sell their products at that price. For example, if the government sets a low price for apartments to help people afford housing, landlords might not find it worthwhile to rent them out, leading to fewer available apartments. Overall, while price ceilings aim to help consumers, they can reduce market efficiency by creating imbalances between supply and demand.
Detailed Explanation
A price ceiling sets a maximum price for goods. Other options are incorrect because Some might think lower prices help everyone; It's a common belief that everyone can buy goods at lower prices.
Key Concepts
Market Efficiency
Government Intervention
Allocative Efficiency
Topic
Government Policies and Market Efficiency
Difficulty
medium level question
Cognitive Level
understand
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