-Refer to Table 3.1. If the government imposes a price of $2,
A) the price will be above equilibrium.
B) the price will fall to $1 because producers will be forced to incur losses.
C) demand will increase.
D) a surplus equal to 20 units will result.
E) a shortage equal to 20 units will result.

Question

-Refer to Table 3.1. If the government imposes a price of $2,
A) the price will be above equilibrium. 
B) the price will fall to $1 because producers will be forced to incur losses. 
C) demand will increase. 
D) a surplus equal to 20 units will result. 
E) a shortage equal to 20 units will result.

Quizplus · Accepted Answer

If the government imposes a price of $2, which is below the equilibrium price, it will result in a shortage because the quantity demanded will exceed the quantity supplied at that price.