For maxima rule Remote should use option A b. For maximum rule Remote should use option 8 c. For maxima regret Remote should use option A d. For equal probability criterion rule Remote should use option A Chapter 16: Government Regulation of Business 2. When there is a shortage in the industry or firm, it will definitely result in an under allocation of resources. Under allocation can happen without any shortage. For example, if the market is in a monopolistic stage, there is no shortage. The buyers can buy everything they want at a set price.
There are various situations where the market can fail due to under allocation of resources that are not caused by shortages. For instance, if the task of minting a building was scheduled to finish at a certain date and there was not enough paint and painters, the manager did not allocate and did not calculate the correct amount of paint needed and did not have enough painters. Thus, a shortage is not a necessary condition for under allocation of resources. 4. Price gouging seems to occur after natural disasters such as hurricane Strain, Rata, and Sandy.
After a disaster, the community is trying to recover from the homes that they have lost and they are trying to get back on their feet. However, many individuals and companies are charging market prices or goods such as gasoline, bottled water and other necessary items at a higher price than the market. According to the FTC price gouging laws are not required, they are counterproductive. For instance, in 2005, after the hurricane Strain and Rata, it caused a shortage in gasoline and it could have possibly triggered an energy emergency (National Center, 2007).
If anti- gouging laws are enforced by legislation to lower gas prices than what the market dictates during a supply shortage, FTC said that wholesalers and retailers will run out of gasoline and consumers will be worse off (Stresses, Furthermore, anti-gouging laws end up punishing companies who 2001). Have excess and reserves in advance during a crisis. For instance in the Strain hurricane, one of the lessons learned was to reward companies who have excess of oil and gas at the time when it is greatly needed.