Refer to the Accompanying Figure,which Shows Both Short-Run and Long-Run

question 74

Multiple Choice

Refer to the accompanying figure,which shows both short-run and long-run demand and supply curves.If there is a $x binding price floor imposed on a pharmaceutical drug,what will be the amount of the disequilibrium in the short run?

• A) There will be a surplus of 1,500,000 units.
• B) There will be a surplus of 800,000 units.
• C) There will not be a surplus; there will be a shortage.
• D) There will be a surplus of 2,000,000 units.
• E) There will be a surplus of 500,000 units.

---

Definitions:

Income

Receipts garnered on a habitual basis as a result of engaging in work or investment.

Von Neumann-Morgenstern

A theory of expected utility which provides axioms for how rational individuals make decisions under uncertainty.

Utility Function

A mathematical representation of how different bundles of goods or services are valued by an individual or entity for satisfaction or utility.

Expected Utility

A theory in economics that calculates the anticipated utility resulting from different choices, taking into account the likelihood of various outcomes.