Why Is It True That Shortages Usually Occur Mainly When

question 16

Essay

Why is it true that shortages usually occur mainly when price controls are in effect?

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Definitions:

Normal Return

The minimum profit necessary for a company to remain in business, often equated to covering opportunity costs.

Total Fixed Costs

The sum of all costs required to produce any output, assuming they remain constant regardless of the level of production.

Fixed Costs

are expenses that do not change in response to the level of goods or services produced by a business, like rent or salaries.

Variable Costs

Expenses that change in proportion to the production or sales figures.