Using the concept of consumer surplus, discuss where the citizens of Raleigh were better or worse off from the imposition of price gouging laws? Refer to the figure from question 4, being careful to compare the consumer surplus form a situation with and without price gouging laws.Why do you think the citizens clapped when the ‘ice sellers’ were arrested by the police? Our icemen came to the skirts of Raleigh, and headed for the interior, where the citizens waited icelessly. Thepath was blocked by fallen trees, but these were yahoo's not idiots. Yahoos have chainsaws and big ones. Theyrolled the cut logs off the road so their trucks (and, by the way, other cars and emergency vehicles) could pass.I have not been able to find a definitive claim about the price, but it was more than $BOn reaching the front of the line, some customers were angry that the price was so high, but almost no onerefused to pay for the ice. I have also been told that the sellers limited purchased to 4, or 6 bags per customer,but I'm not sure. If this is true, it reflects the altruism of the Native North Carolinian, even ones who are justtrying to make a buck.But the police are charged with upholding the law, even the dumb ones (laws, not the police_ Someone must havemade a call, because two Raleigh police cars and an unmarked car pulled up to the Five Points truck after aboutan hour. The officers talked with the sellers, talked to some of the buyers, still holding their ice, and confirmedthat the price was much higher than the "correct" price of $1.75 (cost of a bag of ice before the storm). Theofficers did their duty and arrested the yahoos.Apparently, the truck was then driven to the police impoundment lot in downtown Raleigh as evidence. The icemay or may not have melted (accounts vary), but It certainly was not given out to the citizens.And now we are back to where we stated; The citizens, the prospective buyers being denied a chance to buy ice,they clapped. Clapped, cheered and hooted as the vicious ice sellers were handcuffed and arrested. Some of thosebuyers had been standing in line for 5 minutes or more and had been ready to pay 4 times as much as themaximum price the state would allow. And they called as the police, at gunpoint, took that opportunity away fromthem. Hurricane Fran and Government InterventionHurricane 'Fran' Smashed into the North Carolina coastline at Cape Fear at about B.30pm, 5" September 1996, Itwas a category 3, with 120 mph winds, and enormous rain bands. It ran nearly due north, hitting the state capitalof Raleigh about Jam, and moving northeast out of the state by mor ni ng. The storm also dropped as much as teninches of rain. In some countries, nearly every building was damaged; total reconstruction cost and damages werelater calculated at $5 billion.In the Triangle (Raleigh, Durham and Chapel Hill), more than a million people were without power the nextmor ning. Humidity made everything sticky. Hundreds of homes had roofs damaged by falling pines and powerfulwinds. Few residences had any kind of back-up power. Many roads were blocked by large fallen trees. Within hours,food in the refrigerators and freezers started to go bad. Insulin, baby formula and other necessities almostimmediately became susceptible to spoilage in the 92+ heat.The damage was so widespread, and communication so sketchy, that no one has any firm idea of when the powerwould be restored, More than a million people needed ice. And they needed it now.One might think that 1000's or entrepreneurs in the surrounding areas, little touched by the storm, would loadtrucks and head to the disaster area, After all, they owned or could obtain all the things that the residents ofcentral North Caroline needed so desperately. Ice, chainsaws, generators, lumber, tarps for covering gaping holesin their roofs, they needed it all.But no such mass movement of resources to their highest valued use took place. North Carolina had an 'anti-gouging law' which made it illegal to sell anythi ng useful at a price that was 'unreasonably excessive under thecircumstances', This has been widely interpreted to limit price increases to around 5% or less. Each instance ofviolation of this law could result in a fine of up to $5,000. So ice that was created in Charlotte, stayed inCharlotte. Why drive for 3hrs to Raleigh when you can only charge the Charlotte value for ice; plus just enoughgas money to break even?The problem for Raleigh residents was all about price at that point. The prices of all necessities that I wantedto use to 'preserve, protect or sustain' my own life shot up to infinity. Within a day after the storm, there wereno generators, ice or chainsaw to be had, But that means that anyone who brough these commodities into thecrippled city and charged less than infinity would be doing us a service.Some service was, in fact, on the way. Four young men from the town of Goldsboro, an hour east of Raleigh andlargely untouched by the storm, noticed that the freezers at the Circle P's, the Stop Mart's and the HandeeSluggo's were brimming with ice. Convenience stores had stocked up, expecting a more easterly course for thestorm. Now there was an ice surplus in Goldsboro, and a shortage in Raleigh. These young men rented two smallfreezer trucks, paid ŞI.70 each for 500 bags of ice for each truck and set off, filled with a sense of charity andthe public good.Okay, that last part is made up. They were filled with a sense of greed. They may have been bad human beings,real jerks, but who cares? If there had been a benevolent, omniscient social planner, she would be yelling:• Raleigh is desperate for ice.If you have ice, take it to RaleighOf course, there could never be a social planner with that level of information and authority, as Hayek (1945)argued so persuasively. But these yahoos acted as if they heard one anyway, speaking through the price system:*Cheap ice in Goldsboro was expensive ice in Raleigh' so they could make money.Our icemen came to the skirts of Raleigh, and headed for the interior, where the citizens waited icelessly. The

Answer A) They're worse far from the worth gouging laws Cost gouging happens once organizations…

Answered: Why do you think the citizens clapped…

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC