Exhibit 5-2

The diagram below represents the market for butter.
-Refer to Exhibit 5-3. Which of the following price controls would cause a shortage of 20 units of the good?

Question

Exhibit 5-2
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The diagram below represents the market for butter. 
-Refer to Exhibit 5-3. Which of the following price controls would cause a shortage of 20 units of the good?

Quizplus · Accepted Answer

A price ceiling set at $15 would cause a shortage of 20 units because at this price, the quantity demanded is greater than the quantity supplied, creating a situation where not enough butter is available to meet consumer demand. A price floor set at $15 would have no effect, as the equilibrium price is already above this level. Similarly, a price floor or price ceiling set at $35 would be ineffective, as they are both above the equilibrium price and would not affect the market outcome.

Exhibit 5-2 ​

Exhibit 5-2