Question 18
Price DeterminationThe distribution of goods by the price system is distorted when
- A.there is a high degree of competition among producers
- B.producers and consumers operate freely
- C.factors of production are mobile
- D.no allowance is made for social costs and social benefits
- E.there is price control measure in the system
Show the answer and explanation
Answer: E (there is price control measure in the system)
Explanation
Price control stops prices from moving freely to balance demand and supply, so the price system cannot allocate goods properly.