Last Year a Pestilential Fungus Ravaged the Cocoa Fields

Multiple Choice

Last year a pestilential fungus ravaged the cocoa fields.The price of chocolate has risen abruptly to $1 per ounce.The government is considering emergency measures to aid suffering chocolate addicts.One plan being considered is the Chocolate Relief Plan (CRP) .This plan would set a price ceiling of $.80 per ounce on chocolate.This would cause a shortage, so the CRP will limit consumption to no more than 10 ounces of chocolate per person per week.At $.80 per ounce, enough chocolate would be produced for everyone to have 10 ounces.Jill buys less than 10 ounces per week at $1 per ounce but would buy more than 10 ounces if the price dropped to $.80.

A) Jill is definitely better off without the CRP.
B) Jill is better off without the CRP if $1 is the competitive equilibrium price without the CRP.
C) Jill is better off with CRP only if the industry is monopolized and the price exceeds marginal cost in the absence of the CRP.
D) Jill is definitely better off with the CRP.
E) None of the above.