Name: Worksheet 8: Analyzing the Effects of a Price Floor 1. The table below contains information about the corn market Use the table to answer the questions. Price per Quantity Demanded Quantity Supplied bushel (bushels) bushels) $ 1 60,000 0 support price 3 60,000 10,000 g. Suppose the 5 40,000 20,000 support price 7 30,000 30,000 9 20,000 40,000 11 15,000 50,000 13 10,000 55,000 15 5,000 60,000 a. Identify free market equilibrium price and quantity? b. Using the data above, draw a demand and supply graph of the corn market and clearly identify the equi- librium outcome. Draw a large graph and identify data points on your graph. her and why? C. An agricultural support price is a price that the government guarantees farmers will receive for a particu- lar crop. Suppose the federal government sets a support price for corn at $11 per bushel. In the diagram you drew above draw a horizontal line to depict the price support d. What happens in the corn market as a result of the price support? Is there a shortage or a surplus and what is the amount? Economic Efficiency, Government Price Setting, and Taxes 553. Analyzing Name: e. Illustrate the impact of the price support by identifying the following: Use labeled areas as in my notes. i. the area representing consumer surplus after setting the price support ii. the area representing producer surplus after setting the price support? iii. the deadweight loss after setting the price support? f. If the government stands ready to purchase any excess output at the support price, what is the government's expenditure? g. Suppose the government buys up all of the farmers' output at the support price, how many bushels of corn will it have to purchase? h. What will it cost the government to buy all of the farmers' output at the support price? i. Suppose the government buys up all of the farmers' output at the support price and then sells the output to consumers at whatever price it can get. Under this scheme, what is the price at which the government will be able to sell off all of the output it had purchased from the farmers? j. In the question thus far, we have considered two government schemes: (1) where a support price is established and the government purchases any excess supply and (2) where the government buys all the farmers' output at the support price and resell at whatever price it could get. Which scheme will taxpayers prefer and why? k. Consider again the two schemes. Which scheme will corn buyers prefer and why? 1. Consider again the two schemes. Do farmers receive the same revenue under both schemes? If yes, what is the amount of the revenue? If not, then what is the amount of revenue under each scheme? Economic Efficiency, Government Price Setting, and Taxes 56