Macroeconomics 6th Edition by Robert Hall,Marc Lieberman

Exercise 2

In Figure 1, a price ceiling for maple syrup caused a shortage, which led to a black market price ($4) higher than the initial equilibrium price ($3). Suppose that the price ceiling remains in place for years. Over time, some maple syrup firms go out of business. With fewer firms, the supply curve in the figure shifts leftward by 10,000 bottles per month. After the shift in the supply curve:
a. What is the shortage caused by the $2 price ceiling? (Provide a numerical answer.)
b. If all of the maple syrup is once again purchased for sale on the black market, will the black market price be greater, less than, or the same as that in Figure 2? Explain briefly.
Figure 1 A Price Ceiling with a Black Market