Econ 201

Question 5 [16 points] Developed countries often intervene in their agricultural industries, using price floors or quotas (supply management). As an economist in the Department of Agriculture you have estimated the demand to be P = 330 - 5Qq and supply to be P = 120 + 20, for the chicken industry. You have been asked to evaluate two policy choices. Quantities are in tons. a) To begin with, there are no interventions. Find the equilibrium Q and P. Q = 0 P = $0 b) Option 1: Price floor = $190, the government buys up any excess supply. Find Qd. Qs, excess supply, and the cost to the government. Qd = 0 Qs = 0 Excess Supply = 0 Cost = $0 c) Option 2: Quota = 24. Find the corresponding consumer price at this quantity supplied. Pconsumers = $0 d) Which of the above policies will minimize the cost to the government? Price floor Quota O Uncertain/Neither Official Time: 20:36:18 SUBMIT AND MARK SAVE AND CLOSE MacBook SC * CO 11 O O C. O 8 LO # m Q O . . W J I LL