Question

69. Below is the market for avocados. Suppose the government establishes a price floor of S5 per avocado. This will create a. a surplus of 6,000 avocados b. a shortage of 6,000 avocados c. an equilibrium of 10,000 avocados sold d. an equilibrium of 13.000 avocados sold. ANS Price per avocado Supply Demand 7 10 13 (Quantity(thousands) Market for avocados 70. Belcho Corporation makes chemicals, and in doing so emits foul-smelling odors into the air. Assuming that residents in the area surrounding Belcho's factory find such pollution repulsive, not imposing a tax on Belcho's behavior a. creates a dead weight cost to society. b. leads to an over-production of pollution, at least from society's viewpoint. c. means that the price of pollution is under-priced d. all of the above. ANS 71. Economist argue that a clean environment is a normal good. This means that a good approach to achieving a cleaner climate is to a. lower the price of gasoline. b. encourage economic growth which raises everyone's incomes. c. introduce a wealth tax. d. raise income tax rates so the revenue can be used to promote clean energy projects. ANS

Answer 1

Answer 69

At floor price of $5, demand will be 7000 and supply will be 13000 hence there will be surplus of 13000-7000=6000

Hence option a is correct