Refer to the accompanying figure, which shows both short-run and long-run demand and supply curves. If there is a $4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run?
A) There will be a shortage of 1,500,000 units.
B) There will be a shortage of 800,000 units.
C) There will not be a shortage; there will be a surplus.
D) There will be a shortage of 2,000,000 units.
E) There will be a shortage of 500,000 units.

Question

Refer to the accompanying figure, which shows both short-run and long-run demand and supply curves. If there is a $4 binding price ceiling imposed on a pharmaceutical drug, what will be the amount of the disequilibrium in the short run? 
A) There will be a shortage of 1,500,000 units. 
B) There will be a shortage of 800,000 units. 
C) There will not be a shortage; there will be a surplus. 
D) There will be a shortage of 2,000,000 units. 
E) There will be a shortage of 500,000 units.

Quizplus · Accepted Answer

In the short run, the quantity demanded exceeds the quantity supplied at the price ceiling of $4. The difference between quantity demanded and quantity supplied at this price is the shortage. Looking at the graph, at the price of $4, the quantity demanded is 8 million units while the quantity supplied is only 7.2 million units. Therefore, the shortage is 800,000 units.

Refer to the Accompanying Figure, Which Shows Both Short-Run and Long-Run