In a free market system, price control can include both a price floor and a:

• A. tariff
• B. quota
• C. tax subsidy
• D. price ceiling

Answer: (D)

Verified step by step guidance

1. Understand the concept of price controls in a free market system. Price controls are government-imposed limits on the prices that can be charged for goods and services.
2. Recognize that a price floor is a minimum price set above the equilibrium price to prevent prices from falling too low, often leading to a surplus.
3. Identify the counterpart to a price floor, which is a price ceiling. A price ceiling is a maximum price set below the equilibrium price to prevent prices from rising too high, often leading to a shortage.
4. Distinguish price controls from other market interventions such as tariffs (taxes on imports), quotas (limits on quantity), and tax subsidies (financial support), which affect markets differently and are not price controls.
5. Conclude that the correct pair of price controls in a free market system includes both a price floor and a price ceiling, as these directly regulate prices, unlike tariffs, quotas, or subsidies.