consider the market for corn, illustrated in the figure. suppose the government regulates a price floor of…

consider the market for corn, illustrated in the figure. suppose the government regulates a price floor of $11.00 per bushel to help corn farmers.\nwhat will be the effect of this price regulation on the market for corn?\n1. using the point drawing tool, indicate the market price and the quantity demanded with the governments price floor. label this point q_d.\n2. using the triangle drawing tool, indicate the deadweight loss created by the governments price floor relative to the competitive equilibrium. label this dwl.\ncarefully follow the instructions above, and only draw the required objects.

consider the market for corn, illustrated in the figure. suppose the government regulates a price floor of $11.00 per bushel to help corn farmers.\nwhat will be the effect of this price regulation on the market for corn?\n1. using the point drawing tool, indicate the market price and the quantity demanded with the governments price floor. label this point q_d.\n2. using the triangle drawing tool, indicate the deadweight loss created by the governments price floor relative to the competitive equilibrium. label this dwl.\ncarefully follow the instructions above, and only draw the required objects.

Answer

Explanation:

Step1: Locate $Q_D$ at price floor

At price $P=$11.00$, the demand curve intersects this price at quantity $Q_D=200$ (in 1000s of bushels). This is point $(200, 11)$.

Step2: Identify competitive equilibrium

The supply and demand curves intersect at equilibrium: $P^=$7.00$, $Q^=400$ (in 1000s of bushels).

Step3: Locate quantity supplied at price floor

At $P=$11.00$, supply curve gives quantity supplied $Q_S=600$ (in 1000s of bushels).

Step4: Outline deadweight loss (DWL)

DWL is the triangle bounded by:

  1. $(200, 11)$ (quantity demanded at price floor)
  2. $(400, 7)$ (competitive equilibrium)
  3. $(600, 11)$ (quantity supplied at price floor)

Answer:

  1. The point $Q_D$ is at the coordinate (200, 11) (200,000 bushels, $11 per bushel).
  2. The deadweight loss (DWL) is the triangle formed by the three points: (200, 11), (400, 7), and (600, 11).