Suppose That the Market for Corn Is Initially in Equilibrium $P = 10 - Q ^ { d }$

question 58

Multiple Choice

Suppose that the market for corn is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as $P = 10 - Q ^ { d }$ ; the supply curve can be expressed as $P =$ $0.25 Q ^ { s }$ . Quantity is expressed in millions of bushels. Now suppose that the federal government imposes a price floor of $\$ 3$ per bushel of corn. Which of the following best describes the market after the price floor is imposed?

• A) There will be a shortage of 5 million bushels.
• B) There will be a surplus of 5 million bushels.
• C) There will be a surplus of 7 million bushels.
• D) There will be a surplus of 12 million bushels.

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Definitions:

Compounded Quarterly

Calculation of interest done four times a year, where the interest is added to the principal and each subsequent interest computation is based on the new principal amount.

Compounded Annually

Pertaining to an interest calculation method where interest is added to the principal at the end of each year, and future interest is calculated on the total.

Compounded Annually

An interest calculation method where interest is added to the principal sum once a year, allowing it to earn interest in the subsequent year.

Annuity

A finance tool that disburses a predetermined series of payments, typically to support individuals financially during retirement.