After Hurricane Andrew hit Florida and Louisiana, consumers expressed outrage at the high prices being charged for chainsaws, generators, and bottled water. If governments followed the consumers’ demands and imposed price ceilings in these markets, what is the likely result?
What will be an ideal response?
Effective price ceilings (i.e., price ceilings set below the equilibrium price) will cause a chronic shortage of the goods, leading to black markets, greater profits for illicit suppliers, and (probably) higher prices than would exist in a free market. Additionally, the quantities supplied of these goods will be lower than in a free market, making people worse off than they otherwise would be.
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Shelly purchases a leather purse for $400. One can infer that:
A. her reservation price was less than $400. B. she paid too much. C. her reservation price was at least $400. D. her reservation price was exactly $400.
An import is a product
A) produced in and purchased by residents of the home country. B) produced in the home country and sold in another country. C) produced in and sold to the residents of a foreign country. D) produced in a foreign country and purchased by the residents of the home country.
Before applying the 35 percent tax rate, firms may deduct
A. employee compensation. B. interest payments. C. depreciation allowances. D. all of these answer options are correct.
An increase in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant
A) rise; LM; right B) rise; IS; right C) fall; LM; left D) fall; IS; left