The following graph shows the annual market for Florida oranges, which are sold

Question

The following graph shows the annual market for Florida oranges, which are sold in units of 90- pound boxes. Use the graph input tool to help you answer the following questions. You wil not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly Graph Input Tool Market for Florida Oranges Price Dollars per 900 gupplien378 Millions of QUANTITY Mlos boes) In this market, the equilibrium price is per box, and the equilibrium quantity of oranges is million boxes. For each of the prices listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls. Price Quantity Demanded (Millions of boxes) Quantity Supplied (Millions of boxes) per box) 35 15 Pressure on Prices True or False: A price ceiling below $25 per box is a binding price ceiling in this market. True False Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on thein land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price c short run. eiling to result in a that i in the long run than in the

Explanation / Answer

1. Equilibrium price = $ 25

2. Equilibrium quantity = 450 million boxes

True, price ceiling below equilibrium price is binding.

shortage; greater in long run

Price Quantity demanded Quantity supplied Pressure on price 35 0 520 (approx) Decrease 15 900 370 (approx) Increase

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