question archive When the government prevents prices from adjusting naturally to supply and demand, a
When the government prevents prices from adjusting naturally to supply and demand, a
Subject:MarketingPrice:2.88 Bought3
When the government prevents prices from adjusting naturally to supply and demand,
a. it stabilizes the economy by reducing market uncertainties.
b. it adversely affects the allocation of resources.
c. the improvement in equity justifies the reduction in efficiency.
d. the improvement in efficiency justifies the reduction in equity.
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Answer: B
If government prevents prices from adjusting naturally, then it will create a shortage or surplus of a good. This is bad because the market is wasting resources. For example, if the government sets a binding price ceiling, then not enough of a good will be produced and resources will be used elsewhere.
