Question

 2. Price controls in the Florida orange market

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

 Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white fleld, the graph and any corresponding amounts in each grey field will change accordingly.

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

 For each of the prices 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.

 True or False: A price ceiling above $25 per bax is not a binding price ceiling in this market.

 True

 False

 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 _______  that is _______  in the long run than in the short run.

Answer 1

Equilibrium price is 25 and equilibrium quantity is 250

Price Qdemanded Qsupplied. Pressure

35. 0. 500. Downward

15. 500. 0. Upward

True - a price ceiling is binding if it is set below equilibrium price

Blanks: shortage, larger

Answer 2

In this market ,the equilibrium price is $25 per box and the equilibrium quantity of oranges is 250 million boxes.

Price (Dollars per box)	Quantity demanded (Millions of boxes)	Quantity supplied (Millions of boxes)	Pressure on prices
35	0	600	Downward
15	600	0	Upward

TRUE a price ceiling above $25 is not a binding price ceiling in this market because binding price ceiling is set below the equilibrium price.

A binding price ceiling results in the shortage.

Short-run supply curve is almost vertical and in the long run ,it is much more price sensitive .Assuming that the long run demand for oranges is the same as the short run demand, we would expect a binding price ceiling to result in a shortage that is more in the long run than in the short run because in the long run ,supply curve is upward sloping and elastic.

Answer 3

Ans. At equilibrium, the seller and the buyer should not have an incentive to change the price they charge or pay for the good respectively. Thus, the point where market is in equilibrium is where demand equals supply. So, the equilibrium point is where demand curve and the supply curve intersects.

Thus, equilibrium quantity is 250 million boxes and corresponding price is $25.

Thank you