1 94% No Service 10:23 АМ HW 1.pdf IV. Price Control Price Per Bushel Quantity Demanded Quantity Supplied (dollars) 36,000 0 30,000 2,000 6 25,000 5,000 6 12 20,000 10,000 15 16,000 16,000 18 13,000 23,000 21 30,000 8,000 24 3,000 36,000 An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop. Suppose the federal government sets a price floor for wheat at $21 per bushel 3 a) Draw supply and demand curves for the agricultural crop. Show how the equilibrium price and quantity will be affected by the price floor (be sure to label the axis) b) If the government agrees to purchase any surplus output at $21, how much will it cost the government? c) If the government buys all of the farmers' output at the floor price, how many bushels of wheat will it have to purchase and how much will it cost the government? d) Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get. Under this scheme, what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale? e) In this problem we have considered two government schemes: (1) a price floor is established and the government purchases any excess output and (2) the government buys all the farmers' output at the floor price and resells at whatever price it can get. Which scheme will the farmers prefer? Which scheme will wheat buyers prefer?

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 11E: Federal excise taxes on gasoline vary widely across the developed world. The United States has the...

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