Give an example not in the text of how price ceilings can lead to a shortage.
What will be an ideal response?
Should show a thorough understanding of how price ceilings can lead to shortages. For example, suppose a pharmaceutical company raises the price of a life-saving drug by 400% because demand is very high. In response to consumer complaints that the firm is jeopardizing their lives, the government sets a much lower price ceiling on that drug. At first patients are happy to be able to buy the drug at the more-affordable price. However, the pharmaceutical company realizes it can produce other drugs more profitably, so it switches its resources to manufacturer more of the other drugs and less of the one subject to the price ceiling. A shortage results, and once again, not all of the patients who need that life-saving drug are able to obtain it.
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Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service
For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal cost of adding the shrub-trimming service to the standard package? A) $15 B) $40 C) $10 D) $25
Robert produces sunglasses. He can sell them for $15 per pair. At the level of output where MR = MC, his AVC = $15.45 and his AFC = $.40 . Explain whether or not Robert should shut down
"Now that Blake paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects
a. the importance of secondary effects. b. the fallacy of composition. c. the law of comparative advantage. d. behavior inconsistent with economizing.
The Classical macroeconomic model proposes that
A) real GDP equals potential GDP as long as inflation equals zero. B) government intervention is required to help the economy reach its potential. C) changes in the quantity of money are critical in driving economic growth. D) socialism produces the most efficient economic outcomes for a society. E) markets work efficiently to produce the best macroeconomic outcomes.