Ethanol Mandates Congress has passed laws requiring that a certain percentage of retail gasoline be from ethanol produced from corn. How would this destroy wealth?
This regulation is mandating the movement of corn from a higher value use such as food, sugar, etc to a lower value use of gasoline (If gasoline was the highest value use you would not require a mandate!) In addition, the required use of ethanol means that petroleum from oil is not being refined. The mandate moves a high valued asset, oil, into lower, unrefined, uses. [Note: The use of oil also causes pollution, an additional cost to society. If refiners would choose to use ethanol if they bore these pollution costs, then wealth may have been created.
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A) It minimizes social surplus. B) It minimizes consumer surplus. C) Sellers do not have an incentive to cut costs. D) Government intervention increases deadweight loss.
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a. Federal Reserve b. Bureau of Standards c. Federal Trade Commission d. Department of Justice.
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