Exhibit 16-5 Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.In order to maintain this price the government will need to buy how many pounds of tobacco?

Question

Exhibit 16-5  Exhibit 16-5 represents the market for leaf tobacco.Suppose the government imposes a floor of $1.25 in this market.In order to maintain this price the government will need to buy how many pounds of tobacco?

Quizplus · Accepted Answer

To maintain a price floor of $1.25, the government needs to buy the excess supply of tobacco. In Exhibit 16-5, the quantity supplied at a price of $1.25 is 2,000 lbs, which is above the quantity demanded of 1,000 lbs. Therefore, the government needs to buy the excess supply of 1,000 lbs to maintain the floor price of $1.25. So, the answer is B) 2,000 lbs.

Exhibit 16-5 Exhibit 16-5 Represents the Market for Leaf