Practice Quiz

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Category - Economics

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If government regulations impose price controls on wheat, and if the production cost of wheat then exceeds that price, what is the most likely result?
  1. There will be a wheat shortage.
  2. Wheat sellers will lose money.
  3. Wheat sellers will sell to retailers below market value.
  4. Wheat sellers will see their profits grow.
Explanation
Answer: A - There will most likely be a wheat shortage as wheat sellers lose less money by not selling wheat. This is exactly what happened in the US in the 1970s with oil. OPEC raised the cost of crude oil while the US government imposed controls on the price of gasoline. Since retailers couldn’t make money buying from OPEC and selling to the American people, there was a massive gas shortage.
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