Suppose that the supply and demand corn corn are given by the inverse functions: P = 20 - 2Qd and P = 4 + 2Qs where P is the price for corn in USD/bu and Q is quantity of corn in billion bu. A price support is enacted equal to 14 USD/bu of corn. a. Conduct a complete welfare analysis of a price support, assuming that a surplus exists, but the government DOES buy the surplus. Use both numbers and graphs.
Suppose that the
a. Conduct a complete welfare analysis of a price support, assuming that a surplus exists, but the government DOES buy the surplus. Use both numbers and graphs.
b. Now suppose that the government wants to use a production quota to achieve the same objectives as the price support. Explain the likely outcome of the production quota, and its probability of success in meeting the objectives in today's global agricultural economy.
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