Some government agricultural policies involve price controls. Other agriculturalpolicies, however, involve quantity controls. The equilibrium price of wheat is $5 and the equilibrium quantity is 100 bushels, as shown in the diagram on the right. Suppose the government institutes a policy that prohibits wheat farmers from growing more than 60 bushels of wheat in total. How would this policy change the supply curve for wheat? Use your supply and demand diagram to show that the government policy would raise the equilibrium price and lower the equilibrium quantity of wheat. Show that the policy will lead to a deadweight loss in the wheat market. 1.) Using the multipoint curve drawing tool, graph the supply curve for wheat with the quota. Label your curve 'Upper S2.' (Note: draw the entire supply curve) 2.) Using the point drawing tool, indicate the market price and quantity with the quota. Label your point 'e 2. 3.) Using the triangle drawing tool, shade in the deadweight loss from the quota. Label your area 'DWL.' Carefully follow the instructions above and only draw the required objects.
Some government agricultural policies involve price controls. Other agriculturalpolicies, however, involve quantity controls. The equilibrium price of wheat is $5 and the equilibrium quantity is 100 bushels, as shown in the diagram on the right. Suppose the government institutes a policy that prohibits wheat farmers from growing more than 60 bushels of wheat in total. How would this policy change the supply curve for wheat? Use your supply and demand diagram to show that the government policy would raise the equilibrium price and lower the equilibrium quantity of wheat. Show that the policy will lead to a deadweight loss in the wheat market. 1.) Using the multipoint curve drawing tool, graph the supply curve for wheat with the quota. Label your curve 'Upper S2.' (Note: draw the entire supply curve) 2.) Using the point drawing tool, indicate the market price and quantity with the quota. Label your point 'e 2. 3.) Using the triangle drawing tool, shade in the deadweight loss from the quota. Label your area 'DWL.' Carefully follow the instructions above and only draw the required objects.
Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand, And Government Policies
Section: Chapter Questions
Problem 10PA
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Some government agricultural policies involve price controls. Other agriculturalpolicies, however, involve quantity controls. The equilibrium price of wheat is $5 and the equilibrium quantity is 100 bushels, as shown in the diagram on the right. Suppose the government institutes a policy that prohibits wheat farmers from growing more than 60 bushels of wheat in total. How would this policy change the supply curve for wheat?
Use your supply and demand diagram to show that the government policy would raise the equilibrium price and lower the equilibrium quantity of wheat. Show that the policy will lead to a deadweight loss in the wheat market.
1.) Using the multipoint curve drawing tool, graph the supply curve for wheat with the quota. Label your curve
'Upper S2.'
(Note:
draw the entire supply curve)2.) Using the point drawing
tool,
indicate the market price and quantity with the quota. Label your point
'e 2.
3.) Using the triangle drawing tool, shade in the deadweight loss from the quota. Label your area 'DWL.'
Carefully follow the instructions above and only draw the required
objects.
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