Scenario: Suppose the market for wheat in the United States is given by the dema

Question

Scenario: Suppose the market for wheat in the United States is given by the demand and supply schedules in the table below (as well as the accompanying graph) U.S Wheat Market Graphical Analysis U.S. Wheat Demand and Supply Schedules Quantity bushel) (millions of (millions of 12 10 Quantity Price ($ per Demanded Supplied bushels) $0-00 $1.00 $2.00 $3.00 $400 $5.00 $6.00 $7.00 $8.00 9.00 $10.00 $11.00 $12.00 10 12 14 16 18 20 12-p 214 10 16 20 22 24 U.S. Wheat Quantity (milions of bu) 24 Suppose the U.S. govenment imposes a minimum price for wheat (price floor) of $6 per bushel Refer to the scenario above. At the minimum price of $6 per bushel, there is a fmillion bushels O A. shortage B. surplus, 3 OC. surplus, 6 O D. shortage, 3 Click to select your answer

Explanation / Answer

A shortage occurs at a price when quantity demanded is greater than quantity supplied at that price and a surplus occurs when the quantity supplied is greater than quantity demanded at that price.

When price is equal to 6, quantity demanded ( = 6) is lesser than quantity supplied ( = 12). Thus there is a surplus.

Surplus = 12 - 6 = 6.

C) Surplus, 6

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