Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Canadian Dairy Commission ( CDC ) administers the price floor for butter, which was set at $ 8 per kilogram in 2 0 1

The Canadian Dairy Commission (CDC) administers the price floor for butter, which was set at $8 per kilogram in 2018. Use the following additional information to answer the following questions: 1) Without the price floor, the equilibrium price of butter is $7 per kilogram, and the equilibrium quantity is 137.2 million kilograms of butter. 2) The supply curve intersects the price axis at $4.50 and the demand curve intersects the price axis at $10.3) At that price, according to data from the CDC, the quantity of butter supplied in 2018 was 154 million kilograms, and the quantity demanded was 124.4 million kilograms 4) To support the price of butter at the price floor, the CDC therefore had to buy up 33.6 million kilograms of butter. Suppose the federal government covers the cost of surplus butter using tax revenue, as they do in the United States. As a result, total surplus (producer plus consumer) is reduced by the amount the CDC spent on buying surplus butter. What is the total surplus when there is a price floor? Do not round your answer. How does this total surplus compare to the total surplus without a price floor from part a? a) The total surplus with the price floor is less than the total surplus without the price floor. b) The total surplus with the price floor is equal to the total surplus without the price floor. c) The total surplus with the price floor is greater than the total surplus without the price floor.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Economics questions