. The government has decided that the free-marketprice of cheese is too low.a. Suppose the government imposes a binding pricefloor in the cheese market. Draw a supply-anddemand diagram to show the effect of this policyon the price of cheese and the quantity of cheesesold. Is there a shortage or surplus of cheese?b. Producers of cheese complain that the price floorhas reduced their total revenue. Is this possible?Explain.c. In response to cheese producers’ complaints, thegovernment agrees to purchase all the surpluscheese at the price floor. Compared to the basicprice floor, who benefits from this new policy?Who loses?

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