Price controls will tend to cause misallocation of resources because
a. production (or opportunity) cost no longer corresponds to market price.
b. people are unable to determine their preferences at the high or low price.
c. producers no longer have incentive to be profitable.
d. consumers no longer have incentive to spend their income efficiently.
A
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If the United States' production possibility frontier was flatter to the widget axis, whereas Germany's was flatter to the butter axis, we know that
A) the United States has no comparative advantage B) Germany has a comparative advantage in butter. C) the U.S. has a comparative advantage in butter. D) Germany has comparative advantages in both products. E) the U.S. has a comparative disadvantage in widgets.
If a city decides to restrict the number of pizza parlors,
A) the price of pizza will increase. B) pizza parlors will make higher profits. C) total welfare will decrease. D) All of the above.