Question

Suppose conditions arise in the sugar market that would lead to a competitive equilibrium price that is below 18.75 cents per pound. In this​ situation, sugar mills will​ __________.

Answer 1

Answer:

Sugar mills will not sell to private businesses, but rather sell to the government. This will force the price back up to $18.75

Explanation:

When there is a situation that will result in fall of equilibrium price, sellers can protect themselves by creating artificial scarcity in the private sector.

By selling to the government they are still engaging in business. The private firms will have to pay more for scarce sugar in the market, thereby pushing the price back up.