How much money does usda spend on buying up surplus butter

Assignment Help Engineering Mathematics

Reference no: EM131530332

Question: The U.S. Department of Agriculture (USDA) administers the price floor for butter, which the 2008 Farm Bill set at $1.05 per pound. At that price, according to data from the USDA, the quantity of butter supplied in 2010 was 1.7 billion pounds, and the quantity demanded was 1.6 billion pounds. To support the price of butter at the price floor, the USDA therefore had to buy up 100 million pounds of butter. The accompanying diagram shows supply and demand curves illustrating the market for butter.

a. In the absence of a price floor, how much consumer surplus is created? How much producer surplus? What is the total surplus?

b. With the price floor at $1.05 per pound of butter, consumers buy 1.6 billion pounds of butter. How much consumer surplus is created now?

c. With the price floor at $1.05 per pound of butter, producers sell 1.7 billion pounds of butter (some to consumers and some to the USDA). How much producer surplus is created now?

d. How much money does the USDA spend on buying up surplus butter?

e. Taxes must be collected to pay for the purchases of surplus butter by the USDA. As a result, total surplus (producer plus consumer) is reduced by the amount the USDA spent on buying surplus butter. Using your answers for parts b-d, what is the total surplus when there is a price floor? How does this compare to the total surplus without a price floor from part a?

Reference no: EM131530332

Questions Cloud

Expected return on equally weighted portfolio of stocks : What is the expected return on an equally weighted portfolio of these three stocks?

Who loses and who benefits from the given policy : In order to ingratiate himself with voters, the mayor of Gotham City decides to lower the price of taxi rides. Assume, for simplicity, that all taxi rides.

Did the policy act as a price ceiling or a price floor : In the late eighteenth century, the price of bread in New York City was controlled, set at a predetermined price above the market price.

Review the log referenced at the completion of installation : Review log referenced at the completion of installation to ensure success. Be sure to set up and enable SQL Server authentication mode when you install software

How much money does usda spend on buying up surplus butter : The U.S. Department of Agriculture (USDA) administers the price floor for butter, which the 2008 Farm Bill set at $1.05 per pound.

What is the true initial cost figure southern : What is the true initial cost figure Southern should use when evaluating its project?

Estimated reduction in collection and processing time : The estimated reduction in collection and processing time is one day. Treasury bills are currently yielding 5 percent per year and there are 365 days per year.

What do you mean by capital budgeting : What do you mean by capital budgeting?

Examine web accessibility for a couple web sites : Examine Web accessibility for a couple Web sites. This is a freely available tool that you can learn about by reviewing the tutorial found here.

User Account

All Pages