Hello, I had a previous question that was answered that is still wrong and I just can't figure it out. Here are the questions again, and my teachers comments. Please help! Thank you
Suppose that the Gondwanaland chairman of production, who sets the governmental price floor for gosum berries, in an effort to assist the gosum berry producers to have a higher income, sets the price floor at $70 per barrel. In that particular year, the amount of gosum berries produced at the $70 price floor was 700 barrels per month. To support the price of gosum berries, the Chairman of Production's Office had to purchase 400 barrels per month. The accompanying chart and diagram shows supply and demand curves illustrating the market for Gondwanaland gosum berries. Price Quantity Supplied Quantity Demanded $120 1,200 $110 1,100 $100 1,000 0 $90 900 100 $80 800 200 $70 700 300 $60 600 400 $50 500 500 $40 400 600 $30 300 700 $20 200 800 $10 100 900 $0 0 1,000 The accompanying diagram shows supply and demand curves illustrating the market for Gondwanaland gosum berries. Utilizing this information, answer the following questions. GONDWANALAND GOSUM BERRY MARKET Supplied Demanded $110 $120 $110 $100 S $10 P R $70 Price m Floor $30 $40 $90 $20 S D 100 200 409 300 708 900 1009 1108 1209 QUANTITYe. After the price floor is instituted, the Chairman of Productions Office buys up any barrels of gosum berries that the producers are not able to sell. With the price floor, the producers sell 300 barrels per month to consumers, but the producers, at this high price floor, produce 700 barrels per month. How much producer surplus is created with the price floor? Show your calculations. Barrels of gosum berries produced= 700 barrels, Price floor is $70The producer surplus = ((the amount of gosum berries produced) X (the price floor - zero)) / Producer surplus = ((700) x ($70 - 0)) / 2 Producer surplus = (700 x $70) / 2 Producer surplus = ($49,000) / 2 Producer surplus = $24,500 Not correct. The price floor now transfers some of the consumer surplus to the producer/seller, and thus the producer surplus is larger. However, deadweight losses ensue as well, taking some surplus from both. Consumer surplus and producer surplus will be determined by finding the area of the triangle, where base X height X .5.a. In the absence of a price floor, the maximum price that a few of the consumers are 50x300 =15000 willing to pay is up to $100 per barrel of gosum berries. The market equilibrium (E) price is $50 Triangle= 1/2 x height x base per barrel. How much consumer surplus is created when there is no price floor? Show your 1/2x30x300=4500 calculations. 15000+4500 = $19,500 The consumer surplus when there is no price floor is $12,500. f. The Chairman of Production's Office buys any barrels of gosum berries that the producers are PE=$50, QE= 500 units not able to sell. With the price floor, the producers sell 300 barrels per month to consumers; but Area of triangle ABE = 1/2 * Base * Height = 1/2 * QE * (AO -BO) the producers, at this high price floor, produce 700 barrels per month. How much money does = 1/2 * 500 * (100 -50 ) the chairman of production's office spend on buying up gosum berries? Show your = 1/2 * 500 * 50 calculations. = 12500 Chairman will spend $28,000 on the surplus gosum berries with the price floor. b. How much producer surplus when there is no price floor? Show your calculations. Amount spent on berries = (quantity produced - quantity demanded) x PE Number of barrels = 700 barrels The producer surplus when there is no price floor is $12,500. Amount of barrels sold = 300 barrels Producer Surplus= 50, area below the equilibrium price line and above the supply curve (S) Cost per barrel =$70 (PE) Area of triangle BOE = 1/2 * Base * Height = 1/2 * QE * (BO) (700 barrels - 300 barrels) x $70 = 1/2 * 500 * 50= 12500 (400 barrels) x $70 = $28,000 c. What is the total surplus when there is no price floor? Show your calculations. g. The Emperor of Gondwanaland must collect taxes from the people to pay for the purchases of The total surplus with no price floor is $25,000. surplus gosum berries by the Chairman of Production's Office. As a result, total surplus Total surplus = Consumer surplus + Producer surplus (producer plus consumer) is reduced by the amount the Chairman of Production's Office spent Total surplus = $12,500 + $12.500 on buying surplus gosum berries. Using your answers for problems d, e, and f above, what is Total surplus = $25,000 the total surplus when there is a price floor? Show your calculations. Since the total surplus is the combined values of the consumer surplus and producer surplus, then d. After the price floor is instituted, the legal minimum price that can be charged by suppliers is we would find the total surplus by adding these two together and then subtract the taxes needed $70 per barrel. The maximum price that a few of the consumers are still willing to pay is $100 for the chairman of production's office to buy the surplus of gosum berries. per barrel of gosum berries. With the price floor at $70 per barrel, consumers buy 300 barrels of gosum berries per month. How much consumer surplus is created with the price floor? Show Total surplus = consumer surplus +producer surplus your calculations. 19500+4500= $24000 The consumer surplus with the price floor is $4,500. h. How does this compare to the total surplus without a price floor from question c above? Is it Area of triangle ACF = 1/2 * Base * Height = 1/2 * QDf * (AO - CO) more, or less, and by how much? = 1/2 * 300 * (100 -70) Without price floor is $1,000 more = 1/2 * 300 * 30= 4500 Without price floor = 25,000, With price floor =24,000 e. After the price floor is instituted, the Chairman of Productions Office buys up any barrels of gosum berries that the producers are not able to sell. With the price floor, the producers sell 300 barrels per month to consumers, but the producers, at this high price floor, produce 700 barrels per month. How much producer surplus is created with the price floor? Show your calculations. Total Surplus Total producer surplus = $19,500g. The Emperor of Gondwanaland must collect taxes from the people to pay for the purchases of surplus gosum berries by the Chairman of Production's Office. As a result, total surplus (producer plus consumer) is reduced by the amount the Chairman of Production's Office spent BU224M2 5 on buying surplus gosum berries. Using your answers for problems d, e, and f above, what is the total surplus when there is a price floor? Show your calculations. Since the total surplus is the combined values of the consumer surplus and producer surplus, then we would find the total surplus by adding these two together and then subtract the taxes needed for the chairman of production's office to buy the surplus of gosum berries. Total surplus when there is a price floor: $4,500 Price floor for consumer surplus= $70 Height : 100 - 70 = 30 Base = 300 Consumer surplus = 0.5 x Height x Base = 0.5 x 30 x 300 = $4,500 See instructions above.h. How does this compare to the total surplus without a price floor from question c above? Is it more, or less, and by how much? The price floor with the total surplus is $15,000 and is $25,000 without the price floor. Without the price floor the total surplus is more in comparison to the total surplus of with price floor. Without price floor the total surplus is increased by (25,000 - 15,000) = $10,000. Without price floor the market price is $50. Consumer surplus : Height = 100 - 50 = 50; Base = 500 Consumer surplus = 0.5 x Height x Base = 0.5 x 50 x 500 = $12,500 Producer surplus : Height = 50; Base = 500 Producer surplus = 0.5 x Height x Base = 0.5 x 50 x 500 = $12,500 Total surplus = C.S. + P.S. = 12500 + 12500 = $25,000 You will take the total from c and minus it from that of g, but it is contingent upon your answer in e being correct as well
