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Suppose that the market for corn is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as P =10 Q ;
Suppose that the market for corn is initially in equilibrium and is perfectly competitive. The demand curve can be expressed as P =10 Q ; the supply curve can be expressed as P =0.25 Q . Quantity is expressed in millions of bushels. Now suppose that the federal government imposes a price floor of $3 per bushel of corn. What is the dead-weight loss (per million bushels) associated with the price floor when the least efficient producers are active?
a) $9.375
b) $2.25.
c) $1.
d) $0.63.
The answer is A. I don't know why. Please explain.
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