Question

Look at the graph. Does zone A represent the result of a price ceiling or price floor, and which scenario is an example of these conditions?

O A price ceiling and the excess butter sitting in European warehouses due to overproduction by farmers
O A price ceiling and the scarcity of food and other goods in Cuba, resulting in smuggling and black-market trading
O A price floor and the lack of construction materials in Venezuela due to exporting them for higher prices
O A price floor and the large amount of corn stored in silos in the U.S. Midwest due to overproduction by farmers

Answer 1

Zone A signifies a price floor, which is linked to the surplus of corn in U.S. Midwest silos. A price floor sets a minimum price above equilibrium, creating excess supply, while a price ceiling sets a cap below equilibrium, potentially causing shortages.

Step-by-step explanation:

Zone A represents the result of a price floor. This is a scenario where the government sets a minimum price for goods that is above the market equilibrium, leading to an excess of supply over demand. In this context, the correct example of a price floor is the large amount of corn stored in silos in the U.S. Midwest due to overproduction by farmers because the guaranteed price for their crops is above the market equilibrium, creating a surplus. Conversely, a price ceiling is a maximum price set below the equilibrium which can lead to a shortage of goods as demand exceeds supply. An example of a price ceiling would be the scarcity of food and other goods in Cuba.

Answer 2

the answer is: A price floor and the large amount of corn stored in silos in the U.S. Midwest due to overproduction by farmers