Final answer:
The price of the good at $52 is higher than the equilibrium price of $25, which suggests a surplus in the market. The correct answer is option 1.
Step-by-step explanation:
If the price of a good is $52 and the equilibrium price is $25, compared to market equilibrium, the price of the good is higher than the equilibrium price. This indicates that the price set is above what would be determined by the interaction of supply and demand within a competitive market. As a result, the quantity supplied by producers will likely be higher than the quantity demanded by consumers, leading to a surplus in the market.
In a similar scenario, if the price of gasoline is set at $1.00 while the equilibrium price is $1.40, the quantity demanded would be higher at the lower price point because consumers would want to purchase more at the cheaper price. Conversely, the quantity supplied would be lower because producers may not be willing to sell as much at a price that is below the equilibrium. This situation would lead to a shortage in the market, as there will be more buyers than sellers at such a low price.
Regarding a price floor, it would have the largest effect if it is set substantially above the equilibrium price. This would create a significant surplus because it would force the price to be higher than what most consumers would be willing to pay, hence reducing the quantity demanded while increasing the quantity supplied.