What is the total surplus and producer surplus

Assignment Help Business Economics

Reference no: EM13796513

Suppose that the U.S. Department of Agriculture (USDA) administers the price floor for cheese, set at $0.17 per pound of cheese. (In real life the actual price floor was officially set at $16.10 per hundredweight of cheese. One hundredweight is 100 pounds.) At that price, according to data from the USDA, the quantity of cheese produced in 2009 by U.S. producers was 212.5 billion pounds, and the quantity demanded was 211 billion pounds. To support the price of cheese at the price floor, the USDA had to buy up 1.5 billion pounds of cheese. The accompanying diagram shows supply and demand curves illustrating the market for cheese.

In the absence of a price floor, the maximum price that a few of the consumers are willing to pay is $0.20 for a pound of cheese whereas the market equilibrium price is $0.13 per pound. The graph also shows that the minimum price at which a few of the producers are willing to sell is $0.06 per pound. In the absence of a price floor, how much consumer surplus is created?

b. How much producer surplus?

c. What is the total surplus?

Reference no: EM13796513

Questions Cloud

How much producer surplus is created now : The minimum price at which a few of the producers are willing to sell a pound of cheese is $0.06, and the price floor is set at $0.17 per pound. With the price floor at $0.17 per pound of cheese, producers sell 212.5 billion pounds of cheese (some to..

Write a two-page essay in which you describe a problem : write a 2-page essay in which you describe a problem, propose three possible solutions to that problem, identify one weakness of your solutions, and conclude your essay.

Find the force on a proton just above earths surface : Suppose all the electrons could be removed from Earth. Find the force on a proton just above Earth's surface under these conditions

Maximum price that a few of the consumers are willing to pay : The maximum price that a few of the consumers are willing to pay is $0.20 per pound of cheese, and the price floor is set at $0.17 per pound. With the price floor at $0.17 per pound of cheese, consumers buy 211 billion pounds of cheese. How much cons..

What is the total surplus and producer surplus : Suppose that the U.S. Department of Agriculture (USDA) administers the price floor for cheese, set at $0.17 per pound of cheese. The graph also shows that the minimum price at which a few of the producers are willing to sell is $0.06 per pound. In t..

Investment in camerons 2013 balance sheet : The difference was attributable to the fair value of Lake''s buildings and its land exceeding book value, each accounting for one-half of the difference.

Concepts affected data communication in the past : Prepare a Reflection Paper. Now that you have finished all of the reading assignments for this course, reflect on three of the major concepts discussed in the reading, and write about those concepts. How do those concepts relate to the subject of dat..

Describe the revenue cycle : Describe the revenue cycle, the chargemaster and various reimbursement methods

Nature of strategic planning : Nature of Strategic Planning

User Account

All Pages