The accompanying table shows hypothetical demand and supply schedules for milk per year. The U.S government decides that the incomes of dairy farmers should be maintained at a level that allowa the traditional family dairy farm to survive. So it implements a price floor of $1 per pint by buying surplus milk until the market price $1 per pint. Graphically show the deadweight loss from the inefficiently low quantity bought and sold due to the implementation of a price floor of $1 per pint. The amount of surplus milk that will be produced as a result of the policy introduced. The cost to the government of this policy. The government sells the surplus milk that it is buying to the elementary schools at a price $0.60 per pint. Schools will buy any amount of milk at this low price. But parents decrease their procurement of milk by 50 million pints per year. What is the cost of the program to the government? Explain the inefficiencies of the policy. Concept Introduction: 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. Deadweight Loss: Deadweight loss is the loss of total surplus due to government intervention in the market. It is the excess burden created due to loss of benefit to the consumers, producers or the government.

Question

Not use ai please

Answer 1

Question

Chapter 5, Problem 4P

To determine

The accompanying table shows hypothetical demand and supply schedules for milk per year. The U.S government decides that the incomes of dairy farmers should be maintained at a level that allowa the traditional family dairy farm to survive. So it implements a price floor of $1 per pint by buying surplus milk until the market price $1 per pint.

Graphically show the deadweight loss from the inefficiently low quantity bought and sold due to the implementation of a price floor of $1 per pint.

The amount of surplus milk that will be produced as a result of the policy introduced.

The cost to the government of this policy.

The government sells the surplus milk that it is buying to the elementary schools at a price $0.60 per pint. Schools will buy any amount of milk at this low price. But parents decrease their procurement of milk by 50 million pints per year. What is the cost of the program to the government?

Explain the inefficiencies of the policy.

Concept Introduction:

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.

Deadweight Loss:

Deadweight loss is the loss of total surplus due to government intervention in the market. It is the excess burden created due to loss of benefit to the consumers, producers or the government.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

Not use ai please

Respond to Luis Rodriguez I recommend Mrs. Ibrahim's proposal to lower interest rates as the more effective approach for fostering economic growth in Sudan. Sustainable Growth - Lowering interest rates encourages investment in productive capacity, which can lead to long-term economic growth rather than a temporary boost from cash transfers. Job Creation - This approach can create more stable employment opportunities by promoting business expansion through lower borrowing costs. Addressing Structural Issues - Lower interest rates can help address underlying structural issues in the economy, such as low production levels, by incentivizing businesses to invest in technology and infrastructure. Inflation Control - While there is a risk of inflation if appropriately managed, focusing on productive investments can help mitigate this risk compared to the potential inflationary effects of direct cash transfers. In conclusion, while both proposals have merit, Mrs. Ibrahim's approach of…

Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. 100 90 80 70 COSTS (Dollars per pound) 8 50 40 ຊ 20 10, 10 10 + MC ATC AVC Π 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) (?)