An Economic Advisory Committee Is Split on a Decision on How

question 99

Multiple Choice

An economic advisory committee is split on a decision on how to react to an export ban by Mexico of avocados.Isaac wants to put a price ceiling on avocados to ensure an adequate demand; Flora wants to put a price floor on avocados to ensure an adequate supply.April claims that doing nothing is the best response.Who understands economics the best?

• A) Isaac
• B) Flora
• C) April
• D) none of them,since none of these policies will organize this disrupted market
• E) Any of the responses will work under the proper circumstances.

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Definitions:

Equilibrium

An economic situation in which no individual would be better off doing something different.

Perfectly Inelastic

A situation where the demand or supply for a good is completely unresponsive to changes in price.

Deadweight Loss

A loss of economic efficiency that can occur when the optimal allocation of resources is not achieved, often due to market failures or government interventions.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price.