ECONOMICS W/CONNECT+20  >C<
ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 3.A, Problem 4ARQ

Subpart (a):

To determine

Price floor.

Subpart (b):

To determine

Price floor.

Subpart (c):

To determine

Price floor.

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Governments can use subsidies to increase demand. For instance, a government can pay farmers to use organic fertilizers rather than traditional fertilizers. That subsidy increases the demand for organic fertilizer. Consider two industries, one in which supply is nearly vertical and the other in which supply is nearlyhorizontal. Assume that firms in both industries would prefer a higher market equilibrium price because a higher market equilibrium price would mean higher profits. Which industry would probably spend more resources lobbying the government to increase the demand for its output? (Assume that both industries have similarly sloped demand curves.) a. The industry with a nearly flat supply curve. b. The industry with a nearly vertical supply curve
17. You're given the following supply and demand table: (LO5-5) P $0 2 4 6 8 10 12 14 Demand Q 1,000 800 700 500 300 200 100 0 P $0 2 4 6 8 10 12 14 Supply Q 0 200 400 500 700 900 1,100 1,200 a. What is equilibrium price and quantity in a market system with no interferences? b. If this were a third-party-payer market where the con- sumer pays $4, what is the quantity demanded? What is the price charged by the seller? c. What is total spending in the two situations described in a and b?
In recent years, the government of Pakistan has established a support price for wheat of about $0.20 per kilogram of wheat. At this price, consumers are willing to purchase 10 billion kilograms of wheat per year, while Pakistani farmers are willing to grow and harvest 18 billion kilograms of wheat per year. The government purchases and stores all surplus wheat. Suppose that the market-clearing price of Pakistani wheat in the absence of price supports is equal to $0.10 per kilogram. At this price, the quantity of wheat demanded is 12 billion kilograms. Under the government wheat price-support program, how much more is spent each year on wheat harvested in Pakistan than otherwise would have been spent in an unregulated market for Pakistani wheat?
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