Suppose an Industry Trade Group Has Convinced Legislators That a Price

Essay

Suppose an industry trade group has convinced legislators that a price floor should be used so that producer surplus is maximized in the market for milk.The group argues that such a policy would save the "family farm." Assuming a downward-sloping linear demand curve and a horizontal long-run supply curve,determine the resulting price,output and social welfare from such a policy.Compare this result to the competitive equilibrium.