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ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 (? 10 Price (Dollars per gallon) Supply Quantity demanded Quantity supplied (Millions of gallons) 23 3 (Millions of gallons) Surplus (Millions of gallons) Shortage (Millions of gallons) 20 Demand 5 10 15 20 25 QUANTITY (Millions of gallons) PRICE (Dollars per gallon)
Transcribed Image Text: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 (? 10 Price (Dollars per gallon) Supply Quantity demanded Quantity supplied (Millions of gallons) 23 3 (Millions of gallons) Surplus (Millions of gallons) Shortage (Millions of gallons) 20 Demand 5 10 15 20 25 QUANTITY (Millions of gallons) PRICE (Dollars per gallon)
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.
Transcribed Image Text: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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