Suppose the government has imposed a price floor on the market for soybeans. Which of the following events couldtransform the price floor from one that is not binding into one that is binding?Select one:O a. Consumers' income increases, and soybeans are a normal good.O b. The number of consumers buying soybeans increases.O c. Farmers use improved, draught-resistant seeds, which lowers the cost of growing soybeans.O d. The number of farmers selling soybeans decreases.

Price floor is the minimum price that must be paid to sellers. It is binding when it is set above…

Answered: Suppose the government has imposed a…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 2PA

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If a price floor benefits producers, why does a price floor reduce social surplus?
(a) Define price ceiling and price floor and give an example of each. Which leads to a shortage? Which leads to a surplus? Why? (b) Suppose the government removes a tax on buyers of a good and levies a tax of the same size on sellers of the good. How does this change in tax policy affect the price that buyers pay sellers for this good, the amount buyers are out of pocket (including any tax payments they make), the amount sellers receive (net of any tax payments they make), and the quantity of the good sold?
please show all workingQuestion 1 (a) Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey.Rum and whiskey are substitutes in consumption. The government implements a price restriction in the sugar cane market with the aim of protecting the farmers.(i) What type of price restriction is implemented by the government? Explain. (ii) Discuss the effect on each market if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. (iii) Illustrate the effect on each market if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers.
b) The government decides to impose a price floor $4.10. It does so by promising farmers that it will buy the amount of corn necessary to keep the price pegged at no less than $4.10 a bushel. In the figure above plot the price floor. c) With the price floor in place, what is the amount of corn consumed by private demanders? d) How much corn do farmers supply? e) Describe the effect of a price floor imposed on the corn producers.
Consider the market for corn. Suppose that right now, the equilibrium price is considered “too low” by farmers (i.e. suppliers) in order to make a living. These farmers go to their state representatives and convince them to enact a price floor that is above the equilibrium price. Depict this situation graphically. Is there a shortage or a surplus (or does nothing happen)? Now, conceptually, describe how we know with certainty, that consumers are harmed by this policy. Then, describe conceptually how farmers may be harmed or may benefit from this policy. Graphically depict how we know that consumers are harmed while farmers may be better or worse off (ambiguous). If we were to consider the “total surplus” of consumers and farmers, can we say with certainty whether this economy is better or worse off from the price floor?
Consider the market for ice cream cones. Suppose that supply in this market is given by ?? =?? and demand is given by ?? =30−4×??. Answer the following questions. a.) Suppose that the government is considering imposing a $4.00 price control as either a price ceiling or a price floor. Would this be a binding price control as a price floor or as a price ceiling? Will this cause a shortage or a surplus? Compute the size of the shortage or surplus that would result. b.) Suppose that instead of a price control, the government is considering imposing a $1.00 per ice cream cone tax in the market on producers. Compute the tax equilibrium quantity ???, the consumer effective price with the tax ??, the producer effective price with the tax ??, consumer tax incidence and producer tax incidence. c.) Notice that the competitive equilibrium (??,??) and the point (???,??) are both on the demand curve. Use them to compute the price elasticity of demand. d.) Notice that the competitive equilibrium…
Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium(i.e., supply equals demand in each case). Assume further that a good harvest impactsthe world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption. (b) Discuss the effect on the markets for each of the three products if thegovernment implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers, and whiskey producers?

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