Price floor , economics, Suppose that the U.S. Department of Agriculture (USDA), Microeconomics

Price floor , economics, Microeconomics

Assignment Help:

Suppose that the U.S. Department of Agriculture (USDA) administers the price floor for cheese, set at $0.17 per pound of cheese. (The price floor is officially set at $16.10 per hundredweight of cheese. One hundredweight is 100 pounds.) At that price, according to data from the USDA, the quantity of cheese produced in 2009 by U.S. producers was 212.5 billion pounds, and the quantity demanded was 211 billion pounds. To support the price of cheese at the price floor, the USDA had to buy up 1.5 billion pounds of cheese. The accompanying diagram shows supply and demand curves illustrating the market for cheese.

a. In the absence of a price floor, how much consumer surplus is created? How much producer surplus? What is the total surplus

b. With the price floor at $0.17 per pound of cheese, consumers buy 211 billion pounds of cheese. How much consumer surplus is created now?

c. With the price floor at $0.17 per pound of cheese, producers sell 212.5 billion pounds of cheese (some to consumers and some to the USDA). How much producer surplus is created now?

d. How much money does the USDA spend on buying up surplus cheese?
1.5 billion pounds or $931,677,018.63

e. Taxes must be collected to pay for the purchases of surplus cheese by the USDA. As a result, total surplus (producer plus consumer) is reduced by the amount the USDA spent on buying surplus cheese. Using your answers for parts b—d, what is the total surplus when there is a price floor? How does this compare to the total surplus without a price floor from part a?

Write Your Message!

Name

Email id

Message

Verfication Code

User Account

All Pages

Price floor , economics, Microeconomics

Related Discussions:- Price floor , economics

Test, how much for taking a test

Modern theory of rent, what are the criticisms of modern theory of rent?

Long run equilibrium, 1. Suppose that a monopolistically competitive firm m...

Stoichioemtry and moles, How would you convert from moles of iron(III) oxid...

Factor markets, A firm in a perfectly competitive product market takes the ...

Production, explain 6 factors that determine volume of production

Explain change in quantity demanded and a change in demand, Explain the dif...

Consumer Behavior, Ask questioThe difference between the present value of c...

PROPERTIES OF INDIFFERENCE CURVES, #question.PROPERTIES OF INDIFFERENCE CUR...

Brief overview on signs and symptoms, Project requirements: Refer to Table...

Write Your Message!

Featured Services

Online Tutoring

Project Development

Exam Preparation

Course Help

Assignment Help

Popular Subjects

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT