The statement that \"price controls do not eliminate competition\": is false bec

Question

The statement that "price controls do not eliminate competition": is false because price controls prevent rich consumers from outbidding poor consumers for goods and services. is false because firms are no longer allowed to exploit consumers by charging higher prices after hurricanes or major snowstorms. reflects the idea that consumers will compete for price-controlled products by waiting in line and offering bribes to sellers. means that sellers will increase the quality of their product when they cannot legally increase their prices.

Explanation / Answer

3rd option is correct.

If the price control is in form of price ceiling, then a binding ceiling price is imposed below the market equilibrium price. At the lower-than-equilibrium price, consumers increase quantity demanded but producers reduce quantity supplied, which creates a shortage. As a result, not all targeted consumers can avail of the lower ceiling price. They have to wait in queue to buy the good, and if they cannot get the good at ceiling price, they need to buy it from producers at a black-market, higher-than-ceiling price, which introduces an element of competition.

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