Use the following to answer question:
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds,it will have the same effect on transactions as a price floor of:
A)$17.50
B)$10
C)$7.50
D)The answer cannot be determined from the information provided.

Question

Use the following to answer question: 
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government imposes a quota limiting sales of shrimp to 250 pounds,it will have the same effect on transactions as a price floor of:
A)$17.50 
B)$10 
C)$7.50 
D)The answer cannot be determined from the information provided.

Quizplus · Accepted Answer

A quota limiting sales of shrimp to 250 pounds would create a situation where the quantity supplied is greater than the quantity demanded at the current market price. To find the price floor that would have the same effect, we look for the price at which the quantity demanded is 250 pounds. In the figure (which I can't see but am inferring based on typical supply and demand analysis), this would correspond to a higher price than the equilibrium price, where the quantity demanded decreases to 250 pounds. Assuming the figure shows that at $17.50, the quantity demanded is 250 pounds, then a price floor of $17.50 would have the same effect as a quota limiting sales to 250 pounds, by making it so that no more than 250 pounds could be sold, due to the lack of demand at that higher price.

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