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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Investment is the expenditure done by
A) savers. B) firms. C) the rest of the world. D) governments. E) Both answers A and B are correct.
In a decision tree, the difference between a decision node and a terminal node is that
A) at a decision node all participants make the same decision, while at a terminal node different players may make different decisions. B) at a decision node a decision must be made, while a terminal node shows the payoff. C) at a decision node a decision must be made, while at a terminal node the final decision must be made. D) at a decision node all participants are free to make individual decisions but at a terminal node they must agree on a collective decision.