In 2014, U.S House of Representatives approved a farm bill establishing the margin protection program (MPP) for dairy produces. The MPP supports dairy farmers when the margin between feed cost and milk prices falls below $0.08 per pound. Current feed cost is $0.10 per pound, which means the program creates a prices floor for milk at $0.18 per pound. At the price, in 2015 the quantity of milk supplied is 240 billion pounds, and the quantity demanded is 140 billion pounds. To support the price of milk at the price floor , the U.S Department of Agriculture (USDA) has to buy up 100 billion pounds of surplus milk. The supply and demand curves in the following diagram illustrate the market for milk. The consumer surplus and producer surplus created in the absence of floor price and also calculate the total surplus. When the floor price is $0.18, and the consumers buy 140 billion pounds of milk, calculate the amount of consumer surplus When the floor price is $0.18, and the producers sell 240 billion pounds of milk, calculate the producer surplus The money spent by the USDA to buy surplus milk The total surplus when there is a floor price and how does the total surplus compare to the total surplus without a floor price Concept Introduction: Consumer Surplus: Consumer surplus is the difference between the maximum amount the consumer is willing to pay for a good and the amount the consumer actually pays. Producer Surplus: The producer surplus is the difference between the amount that a producer receives and the minimum amount the producer is willing to accept to part with the good. In other words, the producer surplus of a firm is the sum over all units produced of a difference between the market price and the marginal cost of production. Total Surplus: Total surplus is the sum of consumer surplus and producer surplus. Floor Price: It is a government-imposed price control or limits on the minimum price that can be charged for a product. A floor price must be higher than the market price to be effective.

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Answer 1

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Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 3P

To determine

In 2014, U.S House of Representatives approved a farm bill establishing the margin protection program (MPP) for dairy produces. The MPP supports dairy farmers when the margin between feed cost and milk prices falls below $0.08 per pound. Current feed cost is $0.10 per pound, which means the program creates a prices floor for milk at $0.18 per pound. At the price, in 2015 the quantity of milk supplied is 240 billion pounds, and the quantity demanded is 140 billion pounds. To support the price of milk at the price floor, the U.S Department of Agriculture (USDA) has to buy up 100 billion pounds of surplus milk. The supply and demand curves in the following diagram illustrate the market for milk.

The consumer surplus and producer surplus created in the absence of floor price and also calculate the total surplus.

When the floor price is $0.18, and the consumers buy 140 billion pounds of milk, calculate the amount of consumer surplus

When the floor price is $0.18, and the producers sell 240 billion pounds of milk, calculate the producer surplus

The money spent by the USDA to buy surplus milk

The total surplus when there is a floor price and how does the total surplus compare to the total surplus without a floor price

Concept Introduction:

Consumer Surplus:

Consumer surplus is the difference between the maximum amount the consumer is willing to pay for a good and the amount the consumer actually pays.

Producer Surplus:

The producer surplus is the difference between the amount that a producer receives and the minimum amount the producer is willing to accept to part with the good. In other words, the producer surplus of a firm is the sum over all units produced of a difference between the market price and the marginal cost of production.

Total Surplus:

Total surplus is the sum of consumer surplus and producer surplus.

Floor Price:

It is a government-imposed price control or limits on the minimum price that can be charged for a product. A floor price must be higher than the market price to be effective.

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Consider the table below, which has data on insurance status and medical expenditures for different types of professors at Hypothetical University (HU), economics & criminology professors. Assume that there are an equal number of economics and criminology professors. Assume further that econ professors all have the same level of health and criminology professors all have the same level of health. There is evidence of 2021 Insured? Avg. Expenditures Insured? Avg. Expenditures 2020 Economics Professors Criminology Professors Yes. Yes $25,000 $15,000 0000 ??? ??? $28,000 $10,000 I. moral hazard because in 2021 criminology professors dropped their coverage and health expenditures went down. II. adverse selection because in response to rising premiums after 2020, the professors with lower health expenditure dropped coverage Both I and II neither I nor II

Answer 2

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Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 3P

To determine

In 2014, U.S House of Representatives approved a farm bill establishing the margin protection program (MPP) for dairy produces. The MPP supports dairy farmers when the margin between feed cost and milk prices falls below $0.08 per pound. Current feed cost is $0.10 per pound, which means the program creates a prices floor for milk at $0.18 per pound. At the price, in 2015 the quantity of milk supplied is 240 billion pounds, and the quantity demanded is 140 billion pounds. To support the price of milk at the price floor, the U.S Department of Agriculture (USDA) has to buy up 100 billion pounds of surplus milk. The supply and demand curves in the following diagram illustrate the market for milk.

The consumer surplus and producer surplus created in the absence of floor price and also calculate the total surplus.

When the floor price is $0.18, and the consumers buy 140 billion pounds of milk, calculate the amount of consumer surplus

When the floor price is $0.18, and the producers sell 240 billion pounds of milk, calculate the producer surplus

The money spent by the USDA to buy surplus milk

The total surplus when there is a floor price and how does the total surplus compare to the total surplus without a floor price

Concept Introduction:

Consumer Surplus:

Consumer surplus is the difference between the maximum amount the consumer is willing to pay for a good and the amount the consumer actually pays.

Producer Surplus:

The producer surplus is the difference between the amount that a producer receives and the minimum amount the producer is willing to accept to part with the good. In other words, the producer surplus of a firm is the sum over all units produced of a difference between the market price and the marginal cost of production.

Total Surplus:

Total surplus is the sum of consumer surplus and producer surplus.

Floor Price:

It is a government-imposed price control or limits on the minimum price that can be charged for a product. A floor price must be higher than the market price to be effective.

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Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 3P

To determine

In 2014, U.S House of Representatives approved a farm bill establishing the margin protection program (MPP) for dairy produces. The MPP supports dairy farmers when the margin between feed cost and milk prices falls below $0.08 per pound. Current feed cost is $0.10 per pound, which means the program creates a prices floor for milk at $0.18 per pound. At the price, in 2015 the quantity of milk supplied is 240 billion pounds, and the quantity demanded is 140 billion pounds. To support the price of milk at the price floor, the U.S Department of Agriculture (USDA) has to buy up 100 billion pounds of surplus milk. The supply and demand curves in the following diagram illustrate the market for milk.

The consumer surplus and producer surplus created in the absence of floor price and also calculate the total surplus.

When the floor price is $0.18, and the consumers buy 140 billion pounds of milk, calculate the amount of consumer surplus

When the floor price is $0.18, and the producers sell 240 billion pounds of milk, calculate the producer surplus

The money spent by the USDA to buy surplus milk

The total surplus when there is a floor price and how does the total surplus compare to the total surplus without a floor price

Concept Introduction:

Consumer Surplus:

Consumer surplus is the difference between the maximum amount the consumer is willing to pay for a good and the amount the consumer actually pays.

Producer Surplus:

The producer surplus is the difference between the amount that a producer receives and the minimum amount the producer is willing to accept to part with the good. In other words, the producer surplus of a firm is the sum over all units produced of a difference between the market price and the marginal cost of production.

Total Surplus:

Total surplus is the sum of consumer surplus and producer surplus.

Floor Price:

It is a government-imposed price control or limits on the minimum price that can be charged for a product. A floor price must be higher than the market price to be effective.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 3P

To determine