Suppose That a Market Is Initially in Equilibrium

question 28

Multiple Choice

Suppose that a market is initially in equilibrium.Then the government imposes a price floor above the equilibrium price.Which of the following will occur in the absence of a black market?

• A) The market will remain in equilibrium.
• B) The quantity sold will drop.
• C) The quantity demanded will increase.
• D) The quantity supplied will decrease.
• E) An excess demand will develop.

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Definitions:

Command-And-Control Policy

It refers to environmental policies that rely on regulations (permission, prohibition, standard setting, enforcement) rather than economic incentives or market solutions.

Air Pollution

Refers to the release of pollutants into the air that are detrimental to human health and the planet as a whole.

Glue Factory

A glue factory is an establishment where animal glue is produced, typically by boiling animal hides, bones, or connective tissues.

Corrective Taxes

Taxes designed to correct the effects of negative externalities, often imposed to encourage or discourage certain behaviors.