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Economics 11th Edition by William McEachern
Edition 11ISBN: 978-1305505469Economics 11th Edition by William McEachern
Edition 11ISBN: 978-1305505469 Exercise 2
DISTRIBUTION OF COSTS AND BENEFITS Suppose that the government decides to guarantee an above-market price for a good by buying up any surplus at that above-market price. Using a conventional supply-demand diagram, illustrate the following gains and losses from such a price support:
a. The loss of consumer surplus
b. The gain of producer surplus in the short run
c. The cost of running the government program (assuming no storage costs)
d. What is the total cost of the program to consumers?
e. Are the costs and benefits of the support program widespread or concentrated?
a. The loss of consumer surplus
b. The gain of producer surplus in the short run
c. The cost of running the government program (assuming no storage costs)
d. What is the total cost of the program to consumers?
e. Are the costs and benefits of the support program widespread or concentrated?
Explanation
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Diagram for government purchase above th...
Economics 11th Edition by William McEachern
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