APFIVE Long-Run Effects of a Price Ceiling
What could be an unintended long-term effect when the government sets maximum prices on life-saving drugs below their equilibrium levels?
A
Long-term equilibrium is achieved with no deadweight loss as demand increases sufficiently over time matching supply at set prices.
B
Perfect competition arises as firms strive to reduce costs and maintain profitability within imposed limits.
C
Increased investment in pharmaceutical research due to guaranteed affordability leading to more advanced drugs.
D
Drug shortages as suppliers may produce less due to lower profitability, harming consumer welfare in the future.
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