Suppose That a Regulated Industry Experiences an Increase in the Price

question 205

Multiple Choice

Suppose that a regulated industry experiences an increase in the price of inputs used to produce the good. According to the share-the-gains, share-the-pain theory, we would expect

• A) prices to increase by a little immediately and profits to decrease by a lot.
• B) there will be some increase in price but not immediately.
• C) no increase in price.
• D) a quick increase in price maintains profits in the industry.