Last Year a Pestilential Fungus Ravaged the Cocoa Fields

question 5

Multiple Choice

Last year a pestilential fungus ravaged the cocoa fields.The price of chocolate has risen abruptly to $1 per ounce.The government is considering emergency measures to aid suffering chocolate addicts.One plan being considered is the Chocolate Relief Plan (CRP) .This plan would set a price ceiling of $.80 per ounce on chocolate.This would cause a shortage, so the CRP will limit consumption to no more than 10 ounces of chocolate per person per week.At $.80 per ounce, enough chocolate would be produced for everyone to have 10 ounces.Jill buys less than 10 ounces per week at $1 per ounce but would buy more than 10 ounces if the price dropped to $.80.

• A)Jill is definitely better off without the CRP.
• B)Jill is better off without the CRP if $1 is the competitive equilibrium price without the CRP.
• C)Jill is better off with CRP only if the industry is monopolized and the price exceeds marginal cost in the absence of the CRP.
• D)Jill is definitely better off with the CRP.
• E)None of the above.

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Definitions:

Poverty Line

A calculated income level used to determine who is considered poor, typically based on a family's total income and size, below which one is considered to live in poverty.

Poverty Rate

The proportion of a population living below the poverty line, indicating the level of economic deprivation in a society.

Conservative View

An economic philosophy that emphasizes free markets, limited government, and individual entrepreneurship as the keys to economic prosperity.

Charles Murray

A social scientist known for his controversial works on intelligence, education, and social structure in American society.