Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. Which of the following statements is TRUE?
A. An increase in price will occur quicker in the capture hypothesis than the share-the-gains, share-the-pain theory.
B. An increase in price will occur quicker in the share-the gains, share-the-pain theory than the capture hypothesis.
C. Under both the capture hypothesis and the share-the-gains, share-the-pain theory profits will decrease.
D. In the capture hypothesis there will be an increase in price but not in the share-the-gains, share-the-pain theory.
Answer: A
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An unanticipated shift to a more expansionary macro-policy that leads to a higher-than-expected rate of inflation will
a. place downward pressure on prices. b. temporarily reduce unemployment. c. temporarily reduce output. d. temporarily reduce the natural rate of unemployment.
Table 10-1 Aggregate Quantity Aggregate Quantity ? Demanded Supplied Price (billions) (billions) Level $3500 $2900 65 3400 3000 75 3350 3150 90 3250 3250 110 3100 3400 130 In Table 10-1, if full employment occurs at $3,400 billion, then
A. the economy experiences a recessionary gap of $75 billion. B. the economy experiences a recessionary gap of $150 billion. C. the economy experiences an inflationary gap of $75 billion. D. the economy experiences an inflationary gap of $150 billion.