The government wants to drive the price of soybeans above the equilibrium price, p 1 , to
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The government wants to drive the price of soybeans above the equilibrium price, p1, to p2. It offers growers a payment of x to reduce their output from Q1 (the equilibrium level) to Q2, which is the quantity demanded by consumers at p2. Show in a figure how large x must be for growers to reduce output to this level. What are the effects of this program on consumers, farmers, and total welfare? Compare this approach to
(a) Offering a price support of p2,
(b) Offering a price support and a quota set at Q1, and
(c) Offering a price support and a quota set at Q2?
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Related Book For
Microeconomics Theory and Applications with Calculus
ISBN: 978-0133019933
3rd edition
Authors: Jeffrey M. Perloff
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