Why is insulin so expensive?

"Why aren’t we seeing more companies making insulin? There are many reasons for this, but patent evergreening is a big one" (Cowen, Marginal Revolution, April 2019).

White House Sees Hearing Aids as Chance to Lower Prices Through More Competition

What happens when the government removes barriers to entry and allows entry and more competitors? (WSJ, Feb. 2022)

"Getting a pair of hearing aids can cost up to $5,000. The White House says they should be as little as a few hundred dollars. And it says it has a plan to make that possible: deregulate the market to increase competition."

"Because of federal and state regulations, manufacturers typically sell through audiologists and other medical professionals."

"Aditi Sen, an economist and director of research and policy at the Health Care Cost Institute, a think tank, said new entrants should reduce costs, increase access and boost innovation for hearing aids aimed at mild to moderate hearing loss."

"Congress authorized the FDA to create a new category of hearing aids that can be sold over the counter for mild to moderate hearing loss in 2017. Last year, Mr. Biden directed the FDA to speed up the process."

Aluminum Prices Can’t Keep Up With Energy Costs, Driving Wave of Closures

This article illustrates the long-run effects of an increase in input prices AND how the popular media misuse economic terms (WSJ, Jan 2022).

1. "Rising power prices are causing a shakeout in the aluminum sector, forcing the closure of some plants and tightening global supplies." Aluminum production requires huge amounts of electricity. As the price of electricity increases, the supply of aluminum decreases and, therefore, the price of electricity decreases and the equilibrium quantity decreases. One way that smelters reduce the quantity produced in the long run is to close plants. The increase in the price of electricity reduces profitability below the normal rate, even after the price of aluminum increases.
2. "Based on known closures, Morgan Stanley estimates aluminum supply could fall 1 million tons short of demand in 2022." What Morgan Stanley calls "supply" and "demand" is better called "quantity supplied" and "quantity demanded". 

“Free” Sugar Protectionism Is Not As Sweet As It Sounds

"sugar that now costs 19 cents a pound outside America costs us 37 cents a pound" (Galles, AIER, Dec. 2021). 

Another cost of protecting the sugar lobby is are the resources the lobby uses to maintain support in Congress (Cafe Hayek, Dec. 2021).

US Steel responds to higher prices

US Steel is building  a new plant (WSJ, Sep 2021). The new plant represents a long-run increase in supply.

Shortage or scarcity or supply constraints

 

"Intel Corp.’s INTC 1.15% new chief executive said a global chip-supply shortage could stretch two more years". (WSJ, April 2021) Here are questions.

1. Are chips scarce?
2. Does a shortage of chips exist?
3. What is the difference between a shortage and scarcity?
4. If a shortage exists, why doesn't an increase in price eliminate it?
5. What is the difference between the short run and the long run?
6. In which time periods, the short or long runs, can firms "put more capacity on the ground"?
7. Are the manufacturers earning more than a normal rate of return?
8. If firms are not earning more than a normal rate of return, why does Intel want to increase capacity?
9. Could automobile manufacturers have avoided shutting down by paying a premium to purchase the chips they need to maintain production?
10. Why would automobile manufacturers shut down instead of paying a premium to purchase the chips they need to maintain production?

What will the price of oil be?

Analysts disagree over whether the price of oil is going to increase substantially or remain at its current low value (WSJ, July 2020). Some of the analysts argue that low prices are depressing investment so much that prices will increase in the future. Others argue that the demand will remain low. Let's use economics to investigate. Remember that a decrease in investment is equivalent to exit and an increase in investment is equivalent to entry.

1. How does a decrease in demand affect the price of oil in the short run?
2.  How does a decrease in investment affect the price of oil in the long run?
3. If the industry is competitive and the minimum average total cost is $60, is $150 a sustainable price?
4. If the industry is competitive and the minimum average total cost is $60, is $40 a sustainable price?
5. If the industry is competitive and price in the short run falls below the minimum average total cost, what happens to price in the long run?
6. If the industry is competitive and price in the short run rises above the minimum average total cost, what happens to price in the long run?