PRICE (Dollars per gallon) 10 9 1 0 0 5 10 Supply 15 20 QUANTITY (Millions of gallons) Demand 25 The market price of milk without government intervention is $ Graph Input Tool Price (Dollars per gallon) demanded (Millions of gallons) Surplus (Millions of gallons) per gallon. 1 23 0 Quantity supplied (Millions of gallons) Shortage (Millions of gallons) ? 3 20 Consider legislation that doesn't allow the price of milk to be below $8 per gallon and stipulates that the government buy any surplus milk produced at that price. In order to raise the price to $8 per gallon, the government would need to buy million gallons of milk, which would cost the government $ million. Suppose there are only a few dairy farmers 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? The legislation should pass because it is economically efficient, but it probably won't because consumers don't understand enough about economics. The legislation will be easily defeated because the increased price of milk would hurt millions of consumers, who would not reelect their representatives. The legislation may or may not pass since the benefits and costs of the legislation are concentrated among similarly sized groups. The legislation will probably pass because its benefits are concentrated while its costs are widespread.
PRICE (Dollars per gallon) 10 9 1 0 0 5 10 Supply 15 20 QUANTITY (Millions of gallons) Demand 25 The market price of milk without government intervention is $ Graph Input Tool Price (Dollars per gallon) demanded (Millions of gallons) Surplus (Millions of gallons) per gallon. 1 23 0 Quantity supplied (Millions of gallons) Shortage (Millions of gallons) ? 3 20 Consider legislation that doesn't allow the price of milk to be below $8 per gallon and stipulates that the government buy any surplus milk produced at that price. In order to raise the price to $8 per gallon, the government would need to buy million gallons of milk, which would cost the government $ million. Suppose there are only a few dairy farmers 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? The legislation should pass because it is economically efficient, but it probably won't because consumers don't understand enough about economics. The legislation will be easily defeated because the increased price of milk would hurt millions of consumers, who would not reelect their representatives. The legislation may or may not pass since the benefits and costs of the legislation are concentrated among similarly sized groups. The legislation will probably pass because its benefits are concentrated while its costs are widespread.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:PRICE (Dollars per gallon)
0
Supply
10
15
20
QUANTITY (Millions of gallons)
Demand
+
I
economics.
25
The market price of milk without government intervention is $
Graph Input Tool
Price
(Dollars per gallon)
Quantity
demanded
(Millions of gallons)
Surplus
(Millions of gallons)
per gallon.
23
0
Quantity supplied
(Millions of gallons)
Shortage
(Millions of gallons)
3
20
Consider legislation that doesn't allow the price of milk to be below $8 per gallon and stipulates that the government buy any surplus milk produced at
that price. In order to raise the price to $8 per gallon, the government would need to buy
million gallons of milk, which would cost the
government $
million.
Suppose there are only a few dairy farmers 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 should pass because it is economically efficient, but it probably won't because consumers don't understand enough about
O The legislation will be easily defeated because the increased price of milk would hurt millions of consumers, who would not reelect their
representatives.
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.
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