The government decides that the sugar price support program is getting too expensive. It abandons the support price program and instead assigns a marketing quota to each sugar producer. This quota gives the holder the right to sell sugar on the market and can be transferred to other producers. Altogether the quotas allocate to sugar growers add up to 9 million cwt. Please grab this problem, indicating clearly the market price and quantity.
Not sure if this is necessary for the question but given is
demand for sugar: Q= 20 - P Supply for sugar: Q = 2 + P
quantities are in million hundredweight (cwt) and price is dollars per cwt.
picture is of precious question that goes along to help answer this one
Transcribed Image Text:can't save any ne
1. What is the equilibrium price and quantity of sugar in the absence of any
agricultural policy?
P = 9
Q=D11
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2. If the government establishes a support price for sugar of $12 per cwt. (hundred
pounds) and is willing to buy up any surplus sugar at that price, indicate on your
graph the quantity supplied, quantity demanded, and quantity purchased by the
government. If the units are million cwt., how much money is required for the
government purchases? Show this amount on your graph.
The equilibrium price is $9 per cwt. If the government fixes the price at $12 then
there will be an excess of supply of sugar over denand. This means that P =
$12, the demand for sugar is &8 million cwt where the quantity supplied is 14
million cwt There is then an excess supply of 6 million cwt of sugar (14-8-6). If
the government purchases that excess supply at a price of $12 per cwt, it would
requite $72 million for government purchases (12 x 6 = 72) The shaded part of
the rectangle in the graph are government purchases.
3 The government decides that the sugar price support program is getting too
expensive. It abandons the support-price program and instead assigns a
marketing quota to each sugar producer. This quota gives the holder the right to
sell sugar on the market and can be transferred to other producers Altogether
the quotas allocated to sugar growers add up to 9 million cwt. Please graph this
problem, indicating clearly the market price and quantity.
4 If there is a free market for renting quota what is the maximum the quota should
rent for per cwt? If a farmer with marginal production costs of $6 per cwt owned
unto *nuld t hn m orn prnfitoblo for harkim to produeothncungrer to mnt +hn
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