Illustrate what is the total price of program to consumers

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Suppose that the government decides to guarantee and above-market price for a good by buying up and surplus ar the above-market price. Using a conventional supply- demand diagram, illustrate the following gains and losses from such a price support:

a. The loss of consumer surplus

b. The gain of producer surplus in the short run

c. The cost of running the government program ( assuming no storage costs)

d. Illustrate what is the total price of the program to consumers?

e. Are the total cost and benefits of the support program widespread concentrates?

Reference no: EM1345804

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