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8 Jun 2019

Price per Bushel Quantity Demanded(bushels) Quantity Supplied(bushels)
$3 30,000 0
$6 26,000 4000
$9 22,000 9000
$12 18,000 12,000
$15 15,000 15,000
$18 12,000 22,000
$21 8000 28,000
$24 4000 36,000

The table above contains information about the corn market. Use the table to answer the following questions.

a. What are the equilibrium price and quantity of corn?

b. Suppose the prevailing price is $9 per bushel. Is there a shortage or a surplus in the market?

c. What is the quantity of the shortage or surplus?

d. How many bushels will be sold if the market price is $9 per bushel?

e. If the market price is $9 per bushel, what must happen to restore equilibrium in the market?

f. At what price will suppliers be able to sell 22,000 bushels of corn?

g. Suppose the market price is $21 per bushel. Is there a shortage or a surplus in the market?

h. What is the quantity of the shortage or surplus?

i. How many bushels will be sold if the market price is $21 per bushel?

j. If the market price is $21 per bushel, what must happen to restore equilibrium in the market?

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Elin Hessel
Elin HesselLv2
8 Jun 2019

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Related questions

The wheat market is perfectly competitive, and the market supply and demand curves are given by the following equations:

QD=20,000,000-4,000,000P

QS=7,000,000+2,500,000P, where QD and QS are quantity demanded and quantity supplied measured in bushels, and P=price per bushel.

a.) Determine consumer surplus at the equilibrium price and quantity.

b.) Assume that the government has imposed a price floor at $2.25 per bushel and agrees to buy any resulting excess supply. How many bushels of wheat will the government be forced to buy? Determine consumer surplus with the price floor.

For the last 70 years, the U.S. government has used price supports to provide income assistance to American farmers. At times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, a policy by which the government gives the farmer an amount equal to the difference between the market price and the target price for each unit sold. Consider the market for corn depicted in the accompanying figure.


Price of corn quantity of corn (bushels)
Per bushel           demand      supply
$5                           800         1200
4
3                            1000        1000
2
1                            1200         800
0

a. If the government sets a price floor of $5 per bushel, what does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are produced by the farmer? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government and at what price? How much does the program cost the government? How much revenue do corn farmers receive?





b. Suppose the government sets a target price of $5 per bushel for any quantity supplied up to 1,000 bushels What does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government, if any? How much does the government pay the farmer and at what price? How much revenue do corn farmers receive?



c. Which of these programs (in parts a and b) costs corn consumers more? Explain.
Which program costs the government more? Explain. What are the inefficiencies that arise in each of these cases (parts a and)?

5. For the last 70 years the U.S. government has used price supports to provide income assistance to American farmers. At times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, a policy by which the government gives the farmer an amount equal to the difference between the market price and the target price for each unit sold. Consider the market for corn depicted in the accompanying figure.


Price of corn quantity of corn (bushels) Per bushel demand supply
$5 800 1200
4
3 1000 1000
2
1 1200 800
0

a. If the government sets a price floor of $5 per bushel, what does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are produced by the farmer? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government and at what price? How much does the program cost the government? How much revenue do corn farmers receive? (10points)

b. Suppose the government sets a target price of $5 per bushel for any quantity supplied up to 1,000 bushels What does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government, if any? How much does the government pay the farmer and at what price? How much revenue do corn farmers receive? (10 points)

c. Which of these programs (in parts a and b) costs corn consumers more? Explain.
Which program costs the government more? Explain. What are the inefficiencies that arise in each of these cases (parts a and b)? (20 points)


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