Which of the following is a strategy that governments can use to modify the market?

• A. Imposing price controls
• B. Allowing perfect competition without intervention
• C. Eliminating all forms of regulation
• D. Ignoring externalities

Answer: (A)

Verified step by step guidance

1. Understand that governments can influence markets through various strategies aimed at correcting market failures or achieving policy goals.
2. Recognize that 'imposing price controls' refers to setting legal limits on prices, such as price ceilings or price floors, to prevent prices from reaching levels considered unfair or harmful.
3. Note that 'allowing perfect competition without intervention' means the government does not interfere, which is not a strategy to modify the market but rather a laissez-faire approach.
4. Understand that 'eliminating all forms of regulation' removes government influence entirely, which again is not a strategy to modify the market but to withdraw from it.
5. Realize that 'ignoring externalities' means not addressing market failures caused by external costs or benefits, so it is not a strategy to modify the market either.