The diagram to the right illustrates the market for beef. Suppose that the government has instituted a price support program for beef by placing a price floor at $4.00 per pound. Under the program, any unsold beef will be purchased by the government and placed in long-term storage.
a. What is the cost to consumers in lost surplus?
b. What is the cost to taxpayers to purchase the unsold beef?
c. How much producer surplus do sellers of beef gain?
d. What is the loss to society of the beef program?
e. The president of the National Cattleman’s Association makes the following semi extortionary offer to consumers: “Pay us $2.2 million per month forever and we’ll lobby our congressmen to abandon the price support program.” Should consumers pay the Cattleman’s Association? Why or why not?