During a crisis such as Hurricane Sandy, governments often make it illegal to raise the price of
Question:
a. If a person has a flashlight that she values at $5, but its price on the black market is $40, what gains from trade are lost if the government shuts down the black market?
b. Why might a person want to sell a flashlight for $40 during an emergency?
c. Why might a person be willing to pay $40 for a flashlight during an emergency?
d. When will entrepreneurs be more likely to fill up their pickup trucks with flashlights and drive into a disaster area: when they can sell their flashlights for $5 each or when they can sell them for $40 each?
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a The total gains from trade if trade is allowed are 35 these ga...View the full answer
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