Suppose the market supply curve for wheat is shown in the above figure. Calculate the producer surplus when price is $2 per bushel. If legislation mandates that the price be $1 per bushel, what is the resulting loss in producer surplus?
What will be an ideal response?
At a price of $2, producer surplus equals ($1.50 ? 1200)/2 = $900. At a price of $1, producer surplus equals (50ยข ? 500 )/2 = $125. The $1 decrease in prices results in a $775 decrease in producer surplus.
You might also like to view...
When all relevant information is used to forecast inflation, the resulting forecast is called
A) a rational expectation. B) a natural expectation. C) an expected forecast. D) an expansionary expectation. E) the expected expectation.
Testing a theory by comparing the theory's implications with data obtained in the real world is called
A) empirical analysis. B) descriptive calibration. C) historical variance analysis. D) univariate analysis.
Suppose the quantity of nursing services demanded exceeds the quantity of nursing services supplied. The nursing wage rate will:
A) decrease. B) increase. C) not change. D) none of the above
If the marginal propensity to consume (MPC) is 0.8 and there is a desire to increase real GDP by $400 billion, then
A. an increase in real autonomous spending of $80 billion will generate this change. B. an increase in planned real investment spending of $100 billion will generate this change. C. a decrease in autonomous real saving of $400 billion will generate this change. D. an increase in autonomous real consumption spending of $100 billion will generate this change.