Refer to the accompanying figure,which shows both short-run and long-run demand and supply curves.If there is a $x binding price floor imposed on a pharmaceutical drug,what will be the amount of the disequilibrium in the short run?
A) There will be a surplus of 1,500,000 units.
B) There will be a surplus of 800,000 units.
C) There will not be a surplus; there will be a shortage.
D) There will be a surplus of 2,000,000 units.
E) There will be a surplus of 500,000 units.

Question

Refer to the accompanying figure,which shows both short-run and long-run demand and supply curves.If there is a $x binding price floor imposed on a pharmaceutical drug,what will be the amount of the disequilibrium in the short run? 
A) There will be a surplus of 1,500,000 units. 
B) There will be a surplus of 800,000 units. 
C) There will not be a surplus; there will be a shortage. 
D) There will be a surplus of 2,000,000 units. 
E) There will be a surplus of 500,000 units.

Quizplus · Accepted Answer

The short-run equilibrium quantity is where the quantity demanded intersects the original (unaffected by the price floor) supply curve, which is at 2 million units. If a price floor is imposed above the equilibrium price level, there will be a surplus. The quantity supplied at the price floor (3 million units) minus the quantity demanded at that price (2.2 million units, found by following the vertical line from the price floor until it intersects the demand curve) equals 800,000 units. Therefore, there will be a surplus of 800,000 units in the short run.

Refer to the Accompanying Figure,which Shows Both Short-Run and Long-Run