Consider a price ceiling imposed on a monopoly that is set below the competitive price. Design a diagram showing the monopoly equilibrium in this case. Use your diagram to show that a price ceiling set this low will create a shortage.
What will be an ideal response?
The competitive price occurs where the marginal cost curve crosses the demand curve. If a price ceiling is set below this level, then the marginal cost curve will cross the new marginal revenue curve on its horizontal segment, beneath the demand curve. This makes the quantity supplied less than the quantity demanded, causing a shortage. This situation is illustrated in the accompanying diagram.
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Explain how the courts have ruled on price fixing
What will be an ideal response?
What is a tariff?
What will be an ideal response?
If the demand for a product decreases and the supply of the same product increases, the equilibrium quantity will increase
Indicate whether the statement is true or false
Utility payments and tuition fees are examples of ______.
a. property tax b. user charges c. federal grants d. sales tax