Equilibrium price Before Rice Quantities and Prices elasticities Programs Supply (million cwt) 0.75 189.886 Demand (million ewt) -0.4 189.886 Farm Price (S/cwt) 10.00 Consumer price (S/cwt) 10.00 Target Price (S/cwt) None Support Price (S/cwt) None Government Cost (mil $) None NOTE: -- = Not applicable. 1. The Secretary of Agriculture (Mr. Tom Vilsak) is considering recommending a surplus purchase program for rice to the President with a support price of $14.00/cwt. Before he submits his recommendation, he asks you to determine how much rice the government will have to purchase to support the price of rice at that level and what the cost to the government will be. Fill in the blanks below with your answers to the Secretary. a. Surplus to purchase = b. Cost to the government =_ 2. Congressman Drinksalot is proposing a marketing loan program instead of a government surplus purchase program to support price at a loan rate of $14.00/cwt because he claims it will cost the government less than the surplus purchase program. Secretary Vilsak wants to know whether the Congressman is right and asks you to calculate the cost of the marketing loan program to the government. Fill in the blanks below with your answers to the Secretary. a. Cost of marketing loan program to the government = _ How much more (use "+" sign) or less (use "-" sign) will the Congressman's proposed program cost? 3. Senator Cityslicker doesn't like the Secretary's government surplus purchase program proposal or Congressman Drinksalot's marketing loan program because she says both result in too much rice production and cost too much. She proposes a mandatory acreage reduction program to push the price of rice up to $14.00/cwt. Secretary Vilsak asks you to calculate the total reduction in rice supply that would be required to push price to $14.00/cwt under Senator Cityslicker's plan. a. Supply reduction required (Do NOT include a negative sign) = b. Cost of the Senator's program? =_ 4. BONUS QUESTION (OPTIONAL) (2 points): In the previous questions, Calculate the acreage reduction (%) that would be required if there is 5% slippage (Do NOT include negative sign). 5. The U.S. Rice Producers Association proposes a government funded advertising campaign to promote domestic rice consumption. They propose that the slogan for the rice promotion program should be "Try the sticky little white stuff that most of the rest of the world eats because you'll like it and besides it will help rice farmers." (Time to hire an advertising agency to come up with a better slogan!) Anyway, the Secretary wants to know how much more rice people will have to eat to get the price of rice up to $14.00/ewt. Fill in the blank below with your answer to the Secretary. Increased consumption required (Do NOT include a positive sign) =