Suppose that the market for milk can be represented by the following equation: Demand: P=12-0.5Qd Supply: P=0.1Qs Where P is the price per gallon and Q represents quantity of milk, represented in millions of gallons of milk consumed per day. Calculate the equilibrium price and quantity of milk.To help dairy farmers the government sets a minimum price of $2.50 per gallon of milk. What is the new quantity of milk sold in the market?Illustrate your answers to a and b on a graph, using this graph, calculate how the consumer surplus and producer surplus change after the price support are enacted. Also calculate any dead weight loss that results 2. Suppose that the market for milk can be represented by the following equations:Demand: P = 12-0.5QDSupply: P = 0.1Qswhere P is the price per gallon, and Q represents quantity of milk, represented in millions ofgallons of milk consumed per day.a) Calculate the equilibrium price and quantity of milk.b) To help dairy farmers, the government sets a minimum price of $2.50 per gallon of milk.What is the new quantity of milk sold in the marketplace?c) Illustrate your answers to (a) and (b) on a graph. Using this graph, calculate how theconsumer surplus and producer surplus change after the price supports are enacted.Also calculate any deadweight loss that results.d) Suppose that the government supports the $2.50 per gallon price by purchasing anyexcess milk suppliers make available but are unable to sell to consumers. How muchmilk must the government buy?

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Answered: 2. Suppose that the market for milk can…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter4: The Market Forces Of Supply And Demand

Section: Chapter Questions

Problem 10PA

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Suppose that the market for milk can be represented by the following equation: Demand: P=12-0.5Qd Supply: P=0.1Qs Where P is the price per gallon and Q represents quantity of milk, represented in millions of gallons of milk consumed per day. Calculate the equilibrium price and quantity of milk. To help dairy farmers the government sets a minimum price of $2.50 per gallon of milk. What is the new quantity of milk sold in the market? Illustrate your answers to a and b on a graph, using this graph, calculate how the consumer surplus and producer surplus change after the price support are enacted. Also calculate any dead weight loss that results

2. Suppose that the market for milk can be represented by the following equations:
Demand: P = 12-0.5QD
Supply: P = 0.1Qs
where P is the price per gallon, and Q represents quantity of milk, represented in millions of
gallons of milk consumed per day.
a) Calculate the equilibrium price and quantity of milk.
b) To help dairy farmers, the government sets a minimum price of $2.50 per gallon of milk.
What is the new quantity of milk sold in the marketplace?
c) Illustrate your answers to (a) and (b) on a graph. Using this graph, calculate how the
consumer surplus and producer surplus change after the price supports are enacted.
Also calculate any deadweight loss that results.
d) Suppose that the government supports the $2.50 per gallon price by purchasing any
excess milk suppliers make available but are unable to sell to consumers. How much
milk must the government buy?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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