Final answer:
Among the given statements about price controls, the false one is that price ceilings and price floors both lead to reductions in quality. While price ceilings can cause a reduction in quality as suppliers might lower costs, price floors do not inherently affect quality, as producers are guaranteed a minimum price. The false statement among those provided is: b. Price ceilings and price floors both lead to reductions in quality.
Step-by-step explanation:
When considering the subject of price controls, which encompass both price ceilings and price floors, it's essential to assess the truthfulness of various statements about their effects. We will evaluate the provided statements to identify which one is false.
- Price ceilings and price floors both create deadweight loss.
- Price ceilings and price floors both lead to reductions in quality.
- Price ceilings and price floors both result in reductions of the quantity sold.
It's true that price ceilings, such as rent controls, and price floors, like minimum wage laws, can lead to inefficiencies in the market and create deadweight loss by blocking transactions that buyers and sellers would otherwise freely engage in. Both these forms of price controls can indeed result in reductions of the quantity sold, as they prevent the price from reaching its equilibrium level where the quantity demanded equals the quantity supplied.
However, the statement that both price ceilings and price floors lead to reductions in quality is not always accurate. While in some cases, particularly with price ceilings, a reduced price may lead to suppliers cutting costs by lowering the quality of their product or service, this is not an inherent effect of price floors. In the case of price floors, producers are guaranteed a minimum price and so they may maintain or even improve quality to compete with other producers.