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Author Question: The above figure shows supply and demand curves for milk. In an effort to help farmers, the ... (Read 627 times)


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Chou

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Lobcity

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The above figure shows the demand and supply curves in the market for milk. Currently the market is in equilibrium. If the government establishes a $2 per gallon price ceiling to ensure that children are nourished, estimate the change in p, Q, and social welfare.



Kingjoffery

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At a price of $2, only 500 gallons are produced.
The deadweight loss equals [(1000 - 500) ∗ (4 - 2)]/2 = $500.



 

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