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Suppose that the government places a ceiling on the price of Internet access below the equilibriu

Suppose that the government places a ceiling on the price of Internet access below the equilibrium price.

a. Show why there is a shortage of Internet access at the new ceiling price.

b. Suppose that a black market for Internet providers arises, with Internet service providers developing hidden connections. Illustrate the black market for Internet access, including the implicit supply schedule, the ceiling price, the black market supply and demand, and the highest feasible black market price.

 

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