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Question

Developed countries often intervene in their agricultural industries, using price floors or quotas (supply

management). As an economist in the Department of Agriculture you have estimated the demand to be P = 170 − Qd and supply to be P = 20 + 2Qs for the sheep industry. You have been asked to evaluate two policy choices. Quantities are in tons.


a) To begin with, there are no interventions. Find the equilibrium Q and P.


Q= ?

P = ?$



b) Option 1: Price floor = $130, the government buys up any excess supply.

Find Qd, Qs, excess supply, and the cost to the government.


Qd = ?

Qs= ?

Excess Supply=jQuery22409206957025190958_1581392591964 

Cost = $?



c) Option 2: Quota = 36.

Find the corresponding consumer price at this quantity supplied.


Pconsumers= ?$



d)Which of the above policies will minimize the cost to the government?

Price floor

Quota

Uncertain/Neither




 






 

Top Answer

a.At the equilibrium: Q =50 P= $120 b.Qd= 40... View the full answer

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