Asked by Henry Gardner on Jul 05, 2024
Verified
If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price,this would lead to an inefficient number of pumpkins sold in Minnesota.
Price Floor
A government or group-imposed minimum price set above the equilibrium price, ensuring sellers cannot charge less than this amount.
Market-clearing Price
The price at which the quantity supplied of a product equals the quantity demanded, effectively clearing the market of any surplus or shortage.
Pumpkins
A type of squash plant known for its round, orange fruit used primarily for decoration, cooking, and as a symbol of Halloween.
- Ascertain the scenarios where the implementation of price controls and quantity controls could lead to inefficiencies within markets.
Verified Answer
AD
Anand DesaiJul 08, 2024
Final Answer :
True
Explanation :
If the state sets a price floor that is double the current market-clearing price, it is likely that the new price would be higher than what consumers are willing to pay, resulting in a surplus of pumpkins. This means that there will be more pumpkins supplied than demanded, leading to an inefficient number of pumpkins being sold.
Learning Objectives
- Ascertain the scenarios where the implementation of price controls and quantity controls could lead to inefficiencies within markets.