Question
Estimated demand for sugarcane is QD = 45, 000 3, 000 P. Heavy rains increase the cost of harvesting sugarcane and diminish the sugar content
Estimated demand for sugarcane is QD = 45, 000 3, 000 P. Heavy rains increase the cost of harvesting sugarcane and diminish the sugar content of the harvested cane. As a result, the supply (adjusted for sugar content) shifts from the position indicated by the solid line (QS = 13, 500 + 4, 500 P) to the position indicated by the dashed line (QS = 4, 500 + 1, 500 P). Prices are in dollars per ton and quantities are in tons per month. $ Q 15 45,000 QD = 45 000 3, 000P P = 15 1 3, 000 QD 3 P = 3 + 1 4, 500 QS QS = 13, 500 + 4, 500P 21,600 7.8 3 P = 3 + 1 1, 500 QS QS = 4, 500 + 1, 500P 12,000 11 Ignoring potential benefits of the heavy rains for sectors other than sugarcane, the economic cost of the heavy rains is the change in social surplus (i.e., consumer surplus + producer surplus) induced by the rains. Calculate this value. A. $0 B. $57,600 C. $50,600 D. $57,000 E. $67,600
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