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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

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 = 640 - 10Qd and supply to be P = 280 + 2Qs for the sheep industry. You have been asked to evaluate two policy choices. Quantities are in tons. a) To begin with, there are no interventions. Find the equilibrium Q and P. Q = 0 P = $0 b) Option 1: Price floor = $360, the government buys up any excess supply. Find Qd, Qs, excess supply, and the cost to the government. = Qd 0 Qs = 0 Excess Supply = 0 Cost = $0 c) Option 2: Quota = 22. Find the corresponding consumer price at this quantity supplied. P consumers = $0 d) Which of the above policies will minimize the cost to the government? Price floor Quota O Uncertain/Neither

Apr 16 2021 View more View Less

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