Why does a government place price ceilings, such as rent control, on some "essential" goods?
I choose C am I right?
A. to prevent the development of a black market
B. toencourage an increase in supply of necessary items
C. to limit the impact of equilibrium pricing
D. to help reduce demand for these goods
A major characteristic of monopolistic competition is that prices will be
A. higher than in perfect competition.
B. lower than in perfect competition.
C. higher than in a true monopoly.
D. unrelated to the type of competition.
Advances in technology have reduced the cost of manufacturing MP3 players. If demand does not change,
A. more MP3 players will be sold at a higher price.
B. fewer MP3 players will be sold at a higher price.
C. more MP3 players will be sold at a lower price.
D. fewer MP3 players will be sold at a lower price.
Suppose the market for the magazine is in equilibrium. Some students insist on raising the cover price by $1 and printing the same quantity. What is likely to happen?
A. The demand for the magazine will go up.
B. There will be a shortage of 150 magazines.
C. There will be a surplus of 100 magazines.
D. The surplus will be greater than their sales.
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Mark for Review What's This?
To determine the correct answer to this question, let's analyze the options:
A. to prevent the development of a black market: This option suggests that price ceilings are implemented to prevent the creation of a black market, where illegal trading of goods occurs due to scarcity or high prices. While price ceilings can potentially help reduce the incentive for a black market, it is not their primary purpose.
B. to encourage an increase in supply of necessary items: This option suggests that price ceilings are intended to stimulate the production and supply of essential goods. However, price ceilings might actually discourage the production of these goods because suppliers may find it unprofitable to produce them at the artificially low prices dictated by the ceiling.
C. to limit the impact of equilibrium pricing: This option suggests that price ceilings are used to control the impact of market forces on prices and prevent prices from reaching equilibrium levels. Price ceilings are indeed implemented to limit or cap the maximum price that can be charged for a particular good or service.
D. to help reduce demand for these goods: This option suggests that price ceilings are intended to decrease demand for essential goods. While price ceilings can indeed lead to lower prices, there is no guarantee that they will reduce demand. In fact, when prices are artificially low, demand may increase, potentially leading to shortages or other unintended consequences.
Based on the above analysis, it appears that option C, "to limit the impact of equilibrium pricing," is the most accurate answer. Price ceilings are typically implemented as a means of controlling or capping prices to prevent them from reaching equilibrium levels determined by supply and demand forces.