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Equilibrium price and quantity of milk bought and sold

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The Louisiana milk market is described by QD=136,000-20,000PQD=136,000-20,000P (or P=6.8-.00005QDP=6.8-.00005QD), and by QS=100,000P-200,000QS=100,000P-200,000 (or P=2+.00001QSP=2+.00001QS) where QQ is in gallons.

What would be the (unregulated) equilibrium price and quantity of milk bought and sold in Louisiana? How much consumer and producer surplus is there? How much total social surplus is there (CSCS + PSPS)?

Assume the price floor on milk is $3 per gallon. How much milk would be bought and sold? How much consumer and producer surplus is there? How much total social surplus is there (CSCS + PSPS)?

Given the above, why do you think we have a price floor on milk? If it helps, the most recent available data (2007) show that there were 8 fluid milk manufacturing establishments in Louisiana while the state population was 4,293,204.

Reference no: EM133313843

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