Question

Agriculture industry is extremely vulnerable towards weather conditions and economic conditions, so the government constantly imposes price floors (it is illegal to charge a price lower than a specific level) to help the farmers to sell agricultural products at a higher price. Below is the information on the Kumquat market: MB = 70 - 0.5Q MC = 7.5 + 0.125Q What are the equilibrium price and quantity? How much total benefit do kumquat producers receive when the market is in the equilibrium? How much total cost do kumquat producers have when the market is in the equilibrium? Suppose the federal government decides to impose a price floor of $30 per crate. Now how many crates of kumquats will consumers purchase? What is the magnitude of consumer surplus and producer surplus?

Answer 1