Consider the supply and demand model for romaine lettuce depicted in the accompanying graph. Suppose the governmentdecides to impose a binding price floor on the market to aid farmers.a. Please place the end points of the price floor line segment to illustrate a binding price floor in the market.PriceMarket for Romaine LettucePrice FloorQuantityb. After the price floor is implemented, what exists?bothneithera shortagea surplusSupplyDemandc. Shade in the deadweight loss (DWL) that arises due to the price floor.DWL

Price flooding is a government to ensure the minimum returns to the producer. In price flooring, the…

Answered: b. After the price floor is…

b. After the price floor is implemented, what exists? both neither a shortage a surplus Shade in the deadweight loss (DWL) that arises due to the price floor.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the supply and demand model for romaine lettuce depicted in the accompanying graph. Suppose the government
decides to impose a binding price floor on the market to aid farmers.
a. Please place the end points of the price floor line segment to illustrate a binding price floor in the market.
Price
Market for Romaine Lettuce
Price Floor
Quantity
b. After the price floor is implemented, what exists?
both
neither
a shortage
a surplus
Supply
Demand
c. Shade in the deadweight loss (DWL) that arises due to the price floor.
DWL

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Step 1: Define Price floor

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Step 2: Graph Binding price floor

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Step 3: Choose correct option.

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Step 4: Show dead weight loss.

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