E1 Use the graph input tool to help you answer the following questions. You will 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 the grey field will change accordingly.Graph Input Tool(?10Price(Dollars per gallon)SupplyQuantitydemandedQuantity supplied(Millions of gallons)233(Millions of gallons)Surplus(Millions of gallons)Shortage(Millions of gallons)20Demand510152025QUANTITY (Millions of gallons)PRICE (Dollars per gallon) The market price of orange juice without government intervention is Sper gallon.Consider legislation that doesn't allow the price of orange juice to be below $8 per gallon and stipulates that the government buy any surplus orangejuice produced at that price. In order to raise the price to $8 per gallon, the government would need to buymillion gallons of orange juice,which would cost the government smillion.Suppose there are only a few orange growers who would benefit from this legislation and millions of consumers who would suffer through higherprices. In this case, legislation imposing price supports at $8 per gallon would mean which of the following?O The legislation may or may not pass since the benefits and costs of the legislation are concentrated among similarly sized groups.O The legislation will probably pass because its benefits are concentrated while its costs are widespread.O The legislation should pass because it is economically efficient, but it probably won't because consumers don't understand enough abouteconomics.O The legislation will be easily defeated because the increased price of orange juice would hurt millions of consumers, who would not reelecttheir representatives.

Demand Function = P = a - bQ'Supply function = P = A + BQ' Now Put the Give Value at Price 1 Demand…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

The market price of orange juice without government intervention is S
per gallon.
Consider legislation that doesn't allow the price of orange juice to be below $8 per gallon and stipulates that the government buy any surplus orange
juice produced at that price. In order to raise the price to $8 per gallon, the government would need to buy
million gallons of orange juice,
which would cost the government s
million.
Suppose there are only a few orange growers who would benefit from this legislation and millions of consumers who would suffer through higher
prices. In this case, legislation imposing price supports at $8 per gallon would mean which of the following?
O The legislation may or may not pass since the benefits and costs of the legislation are concentrated among similarly sized groups.
O The legislation will probably pass because its benefits are concentrated while its costs are widespread.
O The legislation should pass because it is economically efficient, but it probably won't because consumers don't understand enough about
economics.
O The legislation will be easily defeated because the increased price of orange juice would hurt millions of consumers, who would not reelect
their representatives.

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