Suppose That the Market for Cigarettes Is Initially in Equilibrium

question 27

Multiple Choice

Suppose that the market for cigarettes is initially in equilibrium and is perfectly competitive.The demand curve can be expressed as ; the supply curve can be expressed as Quantity is expressed in millions of boxes per month.Now suppose that the federal government imposes a production quota on cigarettes of 30 million boxes per month.What is the level of excess supply in this market?

• A) There is no excess supply. There is an excess demand of Q = 30.
• B) There is no excess supply or demand.
• C) There is an excess supply of Q = 30.
• D) There is an excess supply of Q = 20.

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