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Question 2 The government sets a price floor to keep the price of butter high as a concession to farmers. a. Show this in a
Question 2 The government sets a price floor to keep the price of butter high as a concession to farmers. a. Show this in a diagram of supply and demand for butter. Assume the supply and demand have the usual slopes. b. What effect will this policy have on the quantities supplied and demanded in the market? Show this on your diagram and explain briefly. c. Is the market outcome created by the price floor likely to be stable? (Explain briefly.) d. Show the net welfare loss (or deadweight loss) resulting from price floor. e. Instead of a price floor the government subsidizes butter. Show the market outcome of this in your diagram
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