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The demand and supply of corn are as follows:
Qd = 2,100 - 125P
Qs = 600 + 175P,
where quantities are in millions of bushels and prices are in dollars per bushel.
(a) Assume that the government introduces a
(i) the change in the
(ii) the change in the
(iii) the
(b) ALTERNATIVELY, assume that the government introduces a price floor of $8 per bushel, but suppliers produce the quantity that they are WILLING to sell at the resulting price. Calculate:
(i) the change in the consumer surplus
(ii) the change in the producer surplus
(iii) the deadweight loss
(c) ALTERNATIVELY, assume that the government supports a price of $8 per bushel by buying the resulting
(i) the change in the consumer surplus
(ii) the change in the producer surplus
(iii) the cost to the government
(iv) the deadweight loss
(d) ALTERNATIVELY, assume that the government introduces a production quota of 1.35 billion bushels, i.e., Q = 1,350. Calculate:
(i) the change in the consumer surplus
(ii) the change in the producer surplus
(iii) the deadweight loss
(e) ALTERNATIVELY, assume that the government gives producers FINANCIAL INCENTIVES to limit output to 1.35 billion bushels, i.e., Q = 1,350. Calculate:
(i) the change in the consumer surplus
(ii) the change in the producer surplus
(iii) the cost to the government
(iv) the deadweight loss
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