Which provision in the U.S. Constitution blocks the erection of trade barriers b

Question

Which provision in the U.S. Constitution blocks the erection of trade barriers between neighboring states?

The mayor of Stockville is seeking reelection and isn’t 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?

Explanation / Answer

(1) Option (b)

In the long run, firm shuts down if price (= MC) < ATC. In this case if Price (MC) is less than $5, P < ATC, there are losses and the firm will exit the market.

(2) Option (b)

(3) Option (b)

The ceiling price, to be binding, has to be put below the market price. At this lower price, firms' profits fall and quantity supplied decreases.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.