It has been demonstrated that a competitive market economy allocates resources e

Question

It has been demonstrated that a competitive market economy allocates resources efficiently. Specifically, in a competitive equilibrium, all opportunities for additional gain have been exhausted so that no individual can be made better off without making another individual worse off. Economists often argue that economic efficiency can be improved if prices that are set by non-market forces are set so that higher prices are charged for relatively overutilized resources.

Which of the following is an example of how a price system can be manipulated to promote efficiency?

A) Price supports can be used to make sure domestic sugar producers stay in business.

B) The price for admission to a national park can be increased during peak times to limit overuse of the park.

C) Rent control can be used to ensure affordable housing in cases when the market price is too high.

D) United Airlines can charge one price for a flight to and from anywhere in the United States, regardless of the actual cost.

Explanation / Answer

C) Rent control can be used to ensure affordable housing in cases when the market price is too high.

Houses are the necessary thing so if goveernment put rent control on the prices of he housing then, it affects the standard of living of people and it leads to efficiency in the allocation of houses.

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