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Suppose that the government establishes a price ceiling of $3.70 for wheat a. What might prompt the government to establish this price ceiling? To control food prices O To use it as a form of trade barrier To use it as income support for farmers O To encourage production

Suppose that the government establishes a price ceiling of $3.70 for wheat a. What might prompt the government to establish this price ceiling? To control food prices O To use it as a form of trade barrier To use it as income support for farmers O To encourage production

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter3: Demand And Supply
Section: Chapter Questions
Problem 57P: A low-income county decides to set a price ceiling on bread so it can make sure that bread is...
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80 3.70 73 75 4.00 75 70 4.30 77 65 4.60 79 60 4.90 81 Suppose that the government establishes a price ceiling of $3.70 for wheat. a. What might prompt the government to establish this price ceiling? O To control food prices O To use it as a form of trade barrier O To use it as income support for farmers O To encourage production b. In the diagram below, demonstrate a price ceiling of $3.70. Instructions: Use the tool provided 'Ceiling' to demonstrate a price ceiling of $3.70 for wheat. Plot only the endpoints of the line (2 points total). 5.2 Tools 4.9 Ceiling 4.6 4.3 (75,4.5) 4.0 3.7 3.4 3.1 55 60 65 70 75 80 85 90 Quantity (thousands of bushels) c. Next, suppose that the government establishes a price floor of $4.60 for wheat. What will be the main effect of this price floor? O It will eliminate the market for wheat. O It will create a surplus. O It will create a shortage. O It will establish the equilibrium quantity. Price per bushel ($)
Transcribed Image Text:80 3.70 73 75 4.00 75 70 4.30 77 65 4.60 79 60 4.90 81 Suppose that the government establishes a price ceiling of $3.70 for wheat. a. What might prompt the government to establish this price ceiling? O To control food prices O To use it as a form of trade barrier O To use it as income support for farmers O To encourage production b. In the diagram below, demonstrate a price ceiling of $3.70. Instructions: Use the tool provided 'Ceiling' to demonstrate a price ceiling of $3.70 for wheat. Plot only the endpoints of the line (2 points total). 5.2 Tools 4.9 Ceiling 4.6 4.3 (75,4.5) 4.0 3.7 3.4 3.1 55 60 65 70 75 80 85 90 Quantity (thousands of bushels) c. Next, suppose that the government establishes a price floor of $4.60 for wheat. What will be the main effect of this price floor? O It will eliminate the market for wheat. O It will create a surplus. O It will create a shortage. O It will establish the equilibrium quantity. Price per bushel ($)
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