Why do government leaders impose price controls such as price ceilings and price floors?

• A. To ensure that all goods are produced at their equilibrium price
• B. To maximize the efficiency of market outcomes
• C. To eliminate all forms of market competition
• D. To protect consumers or producers from prices deemed too high or too low

Answer: (D)

Verified step by step guidance

1. Understand that price controls are government-imposed limits on the prices that can be charged for goods and services in a market.
2. Recognize that a price ceiling is a maximum price set below the equilibrium price to prevent prices from becoming too high, often to protect consumers.
3. Know that a price floor is a minimum price set above the equilibrium price to prevent prices from falling too low, often to protect producers.
4. Realize that these controls are not intended to ensure production at equilibrium prices or to maximize market efficiency, but rather to protect certain groups from prices considered unfair or harmful.
5. Conclude that the primary reason for imposing price controls is to protect consumers or producers from prices deemed too high or too low, rather than to eliminate competition or guarantee efficient market outcomes.