Question
The demand forsugaris:Q =20 - P The supply ofsugaris:Q =2+ P Quantities are in million hundredweight (cwt.) and price is dollars per cwt. Please graph
The demand forsugaris:Q =20 - P
The supply ofsugaris:Q =2+ P
Quantities are in million hundredweight (cwt.) and price is dollars per cwt.
Please graph on graph paper the following problems. Label all axes, lines, and equilibrium values
1.What is the equilibrium price and quantityof sugarinthe absence of any agriculturalpolicy?
2.If thegovernment establishes asupport price forsugar of$12percwt. (hundred pounds)and iswilling to buy up any surplussugarat that price, indicate on your graph the quantity supplied, quantity demanded, and quantity purchased by the government. If the units are millioncwt., how much money is required for the government purchases? Show this amount on your graph.
3.The government decides that thesugarprice support program is getting too expensive. It abandons the support-priceprogram and instead assignsamarketing quotato each sugar producer. This quotagives the holder the right to sellsugar on the market and can be transferred to other producers.Altogether thequotas allocated to sugar growers addup to9millioncwt.Please graph this problem, indicating clearly the market price and quantity.
4.If there is a free market for renting quota, what is the maximum thequota should rent for per cwt?If afarmer with marginal production costs of $6percwt.owned quota, would it be more profitablefor her/himto produce thesugaror to rent the quota to someone else? Please explain.
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