Chapter 2R, Problem

To determine

The question requires us to determine the number of bushels of corn produced at a price floor set by government.

Explanation of Solution

The equilibrium is the economic situation where all market is clear. Generally, the market achieves the equilibrium level at the intersection point of the market demand curve and the supply curve.

At the equilibrium price, Quantity demanded equals the quantity supplied means there is no shortage or surplus of the product at this point.

In the given graph, point E represents the equilibrium point for the corn in the market where:

Equilibrium price = $3 per bushel

Equilibrium quantity = 1000 units.

At a price floor of $5 per bushel,

Quantity supplied = 1200 units

Quantity demanded = 800 units.

Thus, at the price floor of $5 per bushel, 1200 bushels of corn are produced.

Option “e” is correct.