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As an agricultural economics consultant you are analyzing the current market for grain. You are able to determine that market demand and supply functions are as follows: Demand:Qd(P)=80- 1/3P Supply: Qs(P) = 1/2P
Due to government interference in this market the resulting price and quantity are P 1 = 70 and Q1 = 35, repectively.
(a) Graph the market again, this time labeling the deadweight loss on your graph.
(b) Calculate the deadweight loss.
(c) What is a deadweight loss? How does it impact producer and consumer surplus?
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