4. Special-interest groups, lobbying, and rent-seeking behavior The following gr

Question

4. Special-interest groups, lobbying, and rent-seeking behavior The following graph shows the market for orange juice. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in the grey field will change accordingly. variarton=2 Graph Input Tool 12 Price Doilars per gallon Sup Quantity supplied (MWionis on gailons) 10 10 Quantity demandad Millions of galons) 50 0 Shortage 40 (Mons of palkns) (Miians of gallons) u 4 mand 0

Explanation / Answer

The market price without government intervention is $6 per gallon, the equilibrium price when quantity demanded equals quantity supplied.

If the price is $8 per gallon, the quanity demanded is 20 and quantity supplied is 40, surplus of 20. The government will buy the surplus at $8. The cost to the government will be $160 ( 20 x $8)

The legislation will be easily defeated as it would hurt millions of consumers of orange juice.

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