The market demand and supply functions for bread are: QD = 2,000 - 500P and QS = 800 + 100P. To help bread bakers, the Department of Agriculture is considering legislation that would put a price floor at R2.25 per unit. f) What is the change in consumer and producer surplus due to the price floor? g) When the government regulates the price of a good to be no lower than some minimum level. Can such a minimum price make producers as a whole worse off? Explain.

The market demand and supply functions for bread are: QD = 2,000 - 500P and QS = 800 + 100P. To help bread bakers, the Department of Agriculture is considering legislation that would put a price floor at R2.25 per unit. f) What is the change in consumer and producer surplus due to the price floor? g) When the government regulates the price of a good to be no lower than some minimum level. Can such a minimum price make producers as a whole worse off? Explain.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 8MC

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