The table shows the demand and supply schedules for hay before and during a major drought. During the drought, suppose the government gave all farmers an equal quantity of hay. Resale of hay is not permitted. Suppose the government buys the equilibrium quantity of hay determined by demand and supply during the drought. and the price of a bale Total surplus is pre-drought price. OA. maximized; rises OB. maximized; falls Oc. less than the maximum possible; falls OD. less than the maximum possible; rises OE. maximized; does not change Suppose the government buys more than the equilibrium quantity of hay and pays the supply price for this quantity. Total surplus compared to the compared to the total surplus when the equilibrium quantity is compared to the equilibrium price. purchased, and the price of a bale OA. increases; falls OB. decreases: falls Price (dollars per bale) 0 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 Quantity demanded during before drought drought (thousands of bales) 70 40 35 30 25 Quantity demanded 20 15 10 5 0 65 60 55 50 45 40 35 30 Quantity supplied 0 5 10 15 20 25 30 35 . 40

The table shows the demand and supply schedules for hay before and during a major drought. During the drought, suppose the government gave all farmers an equal quantity of hay. Resale of hay is not permitted. Suppose the government buys the equilibrium quantity of hay determined by demand and supply during the drought. and the price of a bale Total surplus is pre-drought price. OA. maximized; rises OB. maximized; falls Oc. less than the maximum possible; falls OD. less than the maximum possible; rises OE. maximized; does not change Suppose the government buys more than the equilibrium quantity of hay and pays the supply price for this quantity. Total surplus compared to the compared to the total surplus when the equilibrium quantity is compared to the equilibrium price. purchased, and the price of a bale OA. increases; falls OB. decreases: falls Price (dollars per bale) 0 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 Quantity demanded during before drought drought (thousands of bales) 70 40 35 30 25 Quantity demanded 20 15 10 5 0 65 60 55 50 45 40 35 30 Quantity supplied 0 5 10 15 20 25 30 35 . 40

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the current price of a product is above the market equilibrium price, there is OA. excess demand, or a surplus B. excess supply, or a surplus OC. excess supply, or a shortage O excess demand, or a shortage of this product.
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