Answered: Market for Florida Oranges 50 45 I…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following graph shows the annual market for Florida oranges, which are sold in units of 90-pound boxes.

In this market, the equilibrium price is $_________ per box, and the equilibrium quantity of oranges is ________ million boxes.

For each price listed in the following table, determine the quantity of oranges demanded, the quantity of oranges supplied, and the direction of pressure exerted on prices in the absence of any price controls.

pressure on prices options: upward, downward

Because it takes many years before newly planted orange trees bear fruit, the supply curve in the short run is almost vertical. In the long run, farmers can decide whether to plant oranges on their land, to plant something else, or to sell their land altogether. Therefore, the long-run supply of oranges is much more price sensitive than the short-run supply of oranges.

Assuming that the long-run demand for oranges is the same as the short-run demand, you would expect a binding price ceiling to result in a _________ (options: shortage, surplus) that is ______ (options: smaller, larger) in the long run than in the short run.

Price
Quantity Demanded
Quantity Supplied
(Dollars per box)
(Millions of boxes)
(Millions of boxes) Shortage or Surplus
Pressure on Prices
20
30

Graph Input Tool
Market for Florida Oranges
50
I Price
(Dollars per box)
45
15
40
Supply
Quantity
Demanded
(Millions of boxes)
Quantity Supplied
(Millions of boxes)
900
35
30
25
20
Demand
15
10
5
90
180 270 360 450 540 630 720 810 900
QUANTITY (Millions of boxes)
PRICE (Dollars per box)

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Step 1

The equilibrium price and equilibrium quantity is determined where price is equal to supply.

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