Question

A price control on oil prevents: -

a. buyers from comparing the value of oil to its price.
b.A price control on oil prevents all of these.
c.the price of oil from acting as a signal.
d.sellers from comparing the price of oil to their costs.

Answer 1

Price controls on oil prevent the price of oil from acting as a signal.

Step-by-step explanation:

Price controls on oil prevent the price of oil from acting as a signal (c). When a price control is implemented, the government sets a maximum or minimum price for a good or service. In the case of oil, if the government sets a maximum price, it prevents the price from rising to its equilibrium level, which is determined by the forces of supply and demand. This interferes with the signaling function of prices as it hampers the ability of the price to reflect changes in supply and demand conditions.