Author Question: Refer to Figure 2-1. Point B is A) technically efficient. B) unattainable with current ... (Read 79 times)

sammy · **on:** Jun 29, 2018

Refer to Figure 2-1. Point B is

A) technically efficient.
B) unattainable with current resources.
C) inefficient in that not all resources are being used.
D) the equilibrium output combination.

Question 2

Read Eye on Price Regulation on p. 185 and explain why a mismatch between intention and outcome is inevitable if a price regulation seeks to block the laws of supply and demand.

What will be an ideal response?

jgranad15 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A

Answer to Question 2

Price regulations have as their purpose the goal of changing the market outcome. For example, minimum wage laws raise the wage rate paid lower-skilled workers and rent controls lower the rent paid for apartments. In both instances, the law is designed to change the equili-brium price (the wage for the minimum wage and the rent for rent controls) determined by supply and demand. Because the equilibrium price is the only price at which there is neither a shortage nor a surplus, a law that changes the price automatically creates either a shortage or a surplus. In the Eye on Price Regulation, the cap on executive pay would create a shortage of executives.