ARE 201-003 Fall 2014 Instructor: Ivan T. Kandilov NC State University Homework 3 (for the week ending Feb. 14, 2014) 1. The graph below represents the market for coffee in Colombia. Price B supply demand Quantity [Ib) 100 160 The government of Colombia decides to raise the equilibrium price of Colombian coffee from $6 to $8 a pound. It considers the three options described below: (a) Imposing quotas on coffee growers so that they produce only 40 pounds and the price of coffee is $8 per pound. Are the coffee growers benefited by this proposal in terms of an increase in their total revenues? (b) Decreeing a price floor for coffee at $8 per pound and purchasing whatever excess is produced and dumping it into the sea. On a graph mark the excess supply, if any, that will occur in this case. What will it cost the government to implement this price floor