Chapter 4, Problem 27CTQ

During a discussion several year; ago on building a pipeline to Alaska to carry natural gas, the U.S. Senate passed a bill stipulating mat there should be a guaranteed minimum price for the natural gas that would flow through line pipeline. The thinking behind the bill was that if private firms had a guaranteed price for their natural gas, they would be more willing to drill for gas and to pay to build the pipeline.

1. Using the demand and supply framework, predict the effects of this price floor on fine price, quantity demanded, and quantity supplied.
2. With the enactment of this price floor for natural gas, what are some of the likely unintended consequences in line market?
3. Suggest some policies other than the price floor that he government can pursue if it wishes to encourage drilling for natural gas and fur a new pipeline in Alaska.