Which of the following correctly completes the statement: "according to standard economic theory, the effect of...
Which of the following correctly completes the statement: "according to standard economic theory, the effect of a price control set by government below the unregulated price but above (or equal to) the average total cost for firms is to:
| increase quantity supplied in both a competitive market and in a natural monopoly market. |
| reduce quantity supplied in both a competitive market and in a natural monopoly market. |
| increase quantity supplied in a competitive market, but decrease quantity supplied in a natural monopoly market. |
| reduce quantity supplied in a competitive market, but increase quantity supplied in a natural monopoly market. |
Homework Answers
Sokjrion: Increase quantity supplied both in competitive and natural monopoly markets.
Because government does this to create surplus by exceeding quantity supplied than quantity demanded and hence prices can be regulated which benefit consumers in the long run.
This creates win win situation for consumers and producers.
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