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Suppose a massive snowstorm hits Michigan and Wisconsin, knocking out power. This leads to a huge...

Suppose a massive snowstorm hits Michigan and Wisconsin, knocking out power. This leads to a huge shortage of generators Michigan has price-gouging laws in place, while Wisconsin does not. Which state will recover from its generator shortage more quickly?

1-Michigan will recover more quickly because prices can adjust to make businesses willing to invest in ice production.

2-Wisconsin will recover more quickly because prices can adjust to make businesses willing to invest in ice production.

3-Wisconsin will recover more quickly because the antigouging laws create incentives to invest in ice production.

4-Michigan will recover more quickly because the antigouging laws create incentives to invest in ice production.

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Answer #1

In case of Wisconsin, there is free market. Increased price of generators will make the producers more profitable. They can produce more units of generators or more firms can enter into market. Supply will increase and prices will start decreasing.

Anti gouging laws make certain price controls. There will be low profits. There will be no incentive for higher production.

So, Correct option is

2. Wisconsin will recover more quickly because prices can adjust to make businesses willing to invest in ice production.

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