Exhibit 16.5

-Refer to Exhibit 16.5,which shows the activity of a market.If the government wants to make a floor price of $3 persist in the market,it should _____

Question

Exhibit 16.5
 
-Refer to Exhibit 16.5,which shows the activity of a market.If the government wants to make a floor price of $3 persist in the market,it should _____

Quizplus · Accepted Answer

To make a floor price of $3 persist in the market, the government needs to create excess demand at $3 per unit, so that suppliers are forced to sell at that price. Purchasing 300 units of the product at $3 per unit in each period will create excess demand at that price point and maintain the floor price of $3. Buying more than 300 units would create excess supply and drive prices below the floor price, while purchasing less than 300 units would not create enough excess demand to maintain the floor price.

Exhibit 16.5 -Refer to Exhibit 16.5,which Shows the Activity of a Market.If