for Florida oranges, which are sold in units of 90-pound boxes. (a). True or False: A price ceiling above $25 per box is a binding price ceiling in this market. (Hint: Economists call a price ceiling that prevents the market from reaching equilibrium a binding price ceiling.) (b). 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
for Florida oranges, which are sold in units of 90-pound boxes. (a). True or False: A price ceiling above $25 per box is a binding price ceiling in this market. (Hint: Economists call a price ceiling that prevents the market from reaching equilibrium a binding price ceiling.) (b). 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
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.
(a). True or False: A price ceiling above $25 per box is a binding price ceiling in this market. (Hint: Economists call a price ceiling that prevents the market from reaching equilibrium a binding price ceiling.)
(b).
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.
Transcribed Image Text:Market for Florida Oranges
50
I Price
(Dollars per box)
45
15
40
Supply
Quantity
Demanded
Quantity Supplied
(Millions of boxes)
900
35
(Millions of boxes)
30
25
20
Demand
15
10
90
180 270 360 450 540 630 720 810 900
QUANTITY (Millions of boxes)
-- -
+.--
PRICE (Dollars per box)
Expert Solution
Step 1
Equilibrium is achieved at the output level where quantity supplied equals quantity demanded.
Thus, equilibrium quantity, Q*= 450 million boxes
Equilibrium price, P*= $25/box
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