Question

Price controlsa. always produce a fair outcome.b. always produce an efficient outcome.c. can generate inequities of their own.d. All of the above are correct

Answer 1

Option C is the correct answer.

Step-by-step explanation:

The price control generates the inequalities because price control is the method to fix a maximum or minimum legal price for the goods and services. Price control includes two types of prices, that is the price ceiling and price floor. In the case of the price ceiling, the price for the commodities are fixed below the equilibrium point and at this price, the demand is greater than supply. However, in the case of the price floor, the prices are fixed above the equilibrium point and at this price, the supply is greater than the demand.

Answer 2

C). Can generate the inequities of their own.

Step-by-step explanation:

The price controls are a central element of government's economic intervention policy in which the government sets the legal minimal or maximal limit on the price of specific goods in order to ensure its affordability to consumers.

As per the question, price controls 'can generate inequities of their own in the economy' because the limitation of price to minimum or maximum by the government would create a disbalance between the demand and supply which is the key factor to maintain economic equilibrium. In this situation, either the demand would exceed the supply or the supply would exceed the demand that would promote inequity in the economy. Therefore, option C is the correct answer.