Consider the Following Demand and Supply Schedules for Some Agricultural

question 46

Multiple Choice

Consider the following demand and supply schedules for some agricultural commodity.
TABLE 5-2
-Refer to Table 5-2.Consider the market-clearing equilibrium.If the government then imposes a production quota of 500 units,the price of this commodity will ________ relative to the free-market equilibrium price.

• A)remain unchanged
• B)rise by $20
• C)fall by $20
• D)rise by $40
• E)fall by $40

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Definitions:

Elastic Demand

a situation where the quantity demanded of a good or service significantly changes in response to a change in price.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price.

Excise Tax

A tax charged on specific goods and services, such as alcohol, tobacco, and gasoline.

Cancer Drug

Medications specifically designed to treat cancer by inhibiting the growth of cancerous cells, often targeted to specific types of cancer.