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Price controls a. always produce a fair outcome. b. always produce an efficient outcome. c. can...

Price controls a. 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.

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Answer #1

The price ceiling is a legal maximum price which can be charged by the sellers and it is set below the equilibrium price. The price ceiling imposed by the government leads shortage of goods.

If price ceiling is set below the equilibrium price, then it will be binding and if it is set above the equilibrium price, then it will be not binding.

Price control is an example of price ceiling. Therefore price control generates inequities of their own because price control leads to excess of demand over supply.

Hence option C is the correct answer.

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