Suppose that the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for
September 3, 2020
Assume that the consumption function is given by C = 200 + 0.5(Y – T) and the investment function is I = 1,000 – 200r, where r is measured in…
September 3, 2020

The market demand function is

QS = 18 – 2P

The market supply function is

QD= 5P – 1.5

both measured in billions of bushels per year. The initial equilibrium price is $2.79, and the initial equilibrium quantity is 12 billion bushels. Consumer surplus is $38.62, producer surplus is $15.45, and aggregate surplus is $54.06. Suppose the government wants to raise the price of corn to $3.50. What are the welfare effects of a price floor, price support, production quota, and voluntary production reduction program?

A price floor

A.Consumer surplus

B.  Producer surplus

C. Cost to the government

D.  Aggregate surplus

E.  Deadweight loss billion

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