Use the graph below to answer the next five questions: Price S .75 Suppy .60 45
ID: 1140254 • Letter: U
Question
Use the graph below to answer the next five questions: Price S .75 Suppy .60 45 .30 .15 0 ,2-3.-4-5 "6 Quantity (1,000s ofunits per time period) 15) Suppose the above graph represents the market for carots. If govemment's goal is to keep the price of carrots at $0.30 per unit, then governmeut will likely a) Impose a price ceiling at S0.30 per unit b) Impose a price floor at $0.30 per unit c) Implement a system of rationing carrots to limit coasumption per d) Allow market forces to detennine the equilibrium price. household 16)A market shortage of 2,000 units would occur at a price of a) S.30 per unit b) $.45 per unit e) 5.60 per unit d) S.75 per unit 17) Goveminent could set n price- _ at $0.60 per unit, which cosuld lead toa a) floor surplus in the amount of 1.000 units b) floor, saplus in the amount of 2,000 its c) ceiling: shortage in the amount of 1.000 units d) ceiling: shortage in the amount of 2.000 maits 18) Suppose the goverameat has established a price ceiling at $0.30 per uait. If the demaad for this produet decreases: a) the sunplus tlhat existed in this market will be cliated b) the suaplus that existed in this market will becone larger c) the shortage that existed in this market will be climiasted d) the shortage that existed in this market will become largerExplanation / Answer
15. impose a price ceiling at $0.30
as per the diagram equilibrium price is $0.45. so, if the market forces are alloweed to determine rquilibrium price it will end up at $0.45. so govt. should impose a ceiling so that the hprice can be ceiled at $ 0.30
16. $ .30 per unit.
in the diagram at the price $0.30, market supply is 3000 units and quantity demanded is 5000.
therefore at this point there is a shortage of 2000 units at market.
17. floor, surplus in the amount of 2000 units.
equilibrium price is $.45. if the price is fixed at .60, it is a price floor. at this point actual price ($.60) is greater than equilibrium price ($.45) therefore, supply will exceed demand. from the graph this surplus can be identified as 2000 units. (market supply is 5000 units and quantity demanded is 3000 leaving a surplus of 2000 units.)
18. the shortage that existed in the market will be eliminated.
At price $.30, price is less than equilibrium price leading to an excess demand. from graph this shortage can be identified as 2000 units. if the demand for the commodity decreases at this point, excess demand (shortage) will be eliminated.
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