During the Past Twenty Years, the Prices of Prescription Drugs

question 374

Multiple Choice

During the past twenty years, the prices of prescription drugs, relative to the prices of other goods, have risen, yet Americans buy more prescription drugs than ever. This might be because

• A) with higher incomes and more older Americans, we have moved rightward along our demand curve for drugs.
• B) with higher incomes and more older Americans, the demand curve for prescription drugs has shifted rightward.
• C) more new firms entered the pharmaceutical industry each year, which caused a rightward shift in the supply curve of prescription drugs.
• D) Both answers A and C are correct.

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