Question

Which one of the following would reduce the efficiency of the market process?

Select one:

a. providing a stable monetary environment

b. protecting persons from fraud and theft

c. promoting competitive markets

d. protecting consumers by imposing legally mandated price ceilings

Answer 1

Option D.

• Protecting consumers by imposing legally mandated price ceilings would reduce the efficiency of the market process.
• A price ceiling is a legal limit set up by the government to limit the price any producer can set for his goods or services inorder to protect consumers from paying very high to acquire goods and services.
• Price ceilings are said to reduce the efficiency of a market process because it creates shortages as the producer's are forced to set their prices below the equilibrium price due to which they earn very less profits.