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Question
The mayor of Stockville is seeking reelection and isnt buying into the health food hype. He believes that french fries are necessary for the happiness of his citizens, but the fast-food restaurants in his city are charging too much for their products. In an effort to shore up election support, the mayor institutes a price ceiling on french fries. Within two years, half of the fast-food restaurants close in Stockville. What is the likely cause?
a. The price ceiling generated long-run economic losses.
b. The price ceiling generated long-run economic profits.
c. A neighboring town is subsidizing french fry producers.
d. A french fry price ceiling without a proportional hamburger price floor created an untenable production balance.
e. A spike in french fry consumption resulted in a long-run decline in health, drastically reducing demand for fast food.
Answer
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