31. One of the members of the Senate Foreign Relations Committee has studied your analysis of Chinese privatization (Demonstration Problems 2–4 and 2–5) but is worried that the freemarket price might be too low to enable producers to earn a fair rate of return on their investment. He asks you to explain what would happen if the Chinese government privatized the market, but agreed to purchase the good from suppliers at a floor price of $4. What do you tell the senator? Assume that the market demand and supply curves (in U.S. dollar equivalent prices) are still given by

Transcribed Image Text:

Q-10-2P and Q = 2+2P