Econ Macro (book Only)
6th Edition
ISBN: 9781337408745
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 4, Problem 10P
To determine
The reason behind acceptation of lower price under market surplus.
Concept Introduction:
Market surplus: When the supply is more in the market than the
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4. Currently the equilibrium price and quantity in the milk market are $4 per gallon and
100,000 gallons. The Price Elasticity of Demand is determined to be 0.80 while the
Price Elasticity of Supply is determined to be 1.20. A price floor is set at 20% above the
current equilibrium price.
(a) Determine the dollar amount of the price floor.
(b) Determine the Qs after the price is imposed.
(c) Determine the Qd after the price is imposed.
10. Which of the following statements about OPEC and the oil market during the 1970s and 1980s is (are)
correct?
(x) Over the long run consumers responded to higher gasoline prices with greater conservation of gasoline
and as a result the demand for OPEC products became less elastic.
(y) OPEC successfully raised the world price of oil in the 1970s and early 1980s primarily due to an inelastic
demand for oil and a reduction in the amount of oil supplied.
(z) OPEC could not successfully keep the price of oil high over the long run, because producers of oil
outside of OPEC responded to the high price by increasing oil exploration and extraction capacity.
A. (x), (y) and (z)
B.
(x) and (y) only
(x) and (z) only
D
(y) and (z) only
Е.
(y) only
Price
$25
20
15
10
10
15
20
25 Quantity
At the equilibrium price, the area of consumer surplus is
just the number, no symbols or letters; and use decimals as it applies)
dollars. (write
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