Take Test: Final Exam Practice 201830 Summer 1 2018 06.. Show Timer Question Com
ID: 1163478 • Letter: T
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Take Test: Final Exam Practice 201830 Summer 1 2018 06.. Show Timer Question Completion Status QUESTION 7 Table 4-10 Price Per Quantity Bushel Demanded Supplied Quantity (dollars) $3 (bushels)bushels) 9 12 15 18 21 24 36,000 30,000 25,000 20,000 16,000 13,000 8,000 3,000 0 2,000 5,000 10,000 16,000 23,000 36,000 Table 4-10 above contains information about the wheat market. Answer the following questic table. Refer to Table 4-10. An agricultural price floor is a price that the government guarantees far for a particular crop. Suppose the federal government sets a price floor for wheat at $21 per a. What is the amount of shortage or surplus in the wheat market as result of the price floor b. If the government agrees to purchase any surplus output at $21, how much will it cost the government? c. If the government buys all of the farmers' output at the floor price, how many bushels of v Click Save and Submit to save and submit. Click Save All Answers to save all answers 3Explanation / Answer
A.
At $21 support price,
Quantity demanded = 8000 bushels
Quantity supplied = 30000 Bushels
Since, quantity demanded is less than the quantity supplied, then it will create surplus in market.
Surplus = 30000-8000 = 22000 bushels
B.
If government buys the surplus,
Then,
Cost to the government = 21*22000 = $462000
C.
It has to buy 30000 bushels.
Cost to the government = 21*30000 = $630000
D.
The quantity demanded of 30000 bushels, takes place at price of $6 per bushel. So, the price is $6 at which all of the government purchase will be sold out.
Revenue received = 30000*6 = $180000
E.
Taxpayers prefer scheme 1 as it limits the loss as government has to buy only the surplus amount. Since the welfare work of paying a support price, will take place on the basis of taxpayers money. Hence, tax payers will go with the scheme 1 and only buy the surplus amount.
F.
Farmer are indifferent to both the schemes. In both the cases, their output is being completely sold at $21 support price. In scheme 1, it is a combination of consumers and government. In scheme 2, it is government only. But, farmers get the same revenue of $21 per bushel for each of 30000 bushels.
G.
Buyers prefer scheme 2, because they get wheat at $6 per bushel. It is a cheaper rate than the equilibrium price of $15 or support price of $21 per bushels.
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