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a https://laecon1.lyryx.com/student-servlets/LabServletlab- 38singleQuestion 4&command-; 0.30658317822963&ccid; 3078 Developed countries often intervene in their agricultural industries, using price floors or quotas (supply management). As an economist in the Department of Agriculture you have estimated the demand to be P 390-5 d and supply to be P-180 + 2Qs for the wheat industry. You have been asked to evaluate three policychoices aantees arein to a To begin with, there are no interventions. Find the equilibrium P and Q.Also find the total revenue (TR) of the suppliers. c) TR-30 Option 1: Price floor $260, the government buys up any surplus (excess supply) Find Qs. Q surplus (ES). TR of the suppliers, and the cost to the government. g) TR-SO h) Cost $o Option 2: Quota-16

Explanation / Answer

1). We have two equations as follows: 1) P= 390-5QD 2) P= 180+2QS

From these two equations we can determine the QD and QS ; QD= (390-P)/5 and QS= (P-180)/2

We know that equlibrium price is that where QD is equal to QS , so (390-P)/5 = (P-180)/2 => P= 240

So P= $240 is equilibrium price.

Put this in equation 2, P=180+2QS => 240=180+2QS => QS=30

Price is $240, quantity is 30, revenues will be 240*30 = $7200

Option 1

At p=$260, QD = (390-p)/5 => QD= (390-260)/5 => QD=26

At p=$260, QS = (p-180)/2 => QS= (260-180)/2 => QS=40

Revenues for suppliers will be = 260*40 = 10,400

Cost to the government = (QS-QD)* p => (40-26) *260 => 14*260= $3640

Surplus = 40-26= 14 units

option 2

At QUOTA QS =16, PRICE will be P= 180 + 2(16) = $212 , Revuenes will be equal to 212*16= $3392

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