Who typically sets price controls, such as price ceilings and price floors, in a market economy?

• A. Producers
• B. Governments
• C. Economists
• D. Consumers

Answer: (B)

Verified step by step guidance

1. Understand the concept of price controls: Price ceilings and price floors are government-imposed limits on how high or low a price can be charged in the market.
2. Recognize the role of different market participants: Producers set supply, consumers determine demand, and economists analyze market behavior but do not set prices.
3. Identify who has the authority to enforce legal restrictions on prices: Only governments have the power to impose and enforce price controls through laws and regulations.
4. Recall examples of price controls: Rent control (price ceiling) and minimum wage laws (price floor) are typical government interventions.
5. Conclude that in a market economy, price controls such as ceilings and floors are typically set by governments to correct market failures or protect certain groups.