Chapter 4: Q. f (page 89)
Other things being equal, is the price of milk in Europe likely to rise or fall in response to the elimination of milk production quotas? Explain your answer.
Fall.
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Consider Figure 4-3.Suppose that the government
reduces the ceiling price to\(500 per unit.Would
the shortage at the\)500-per-unit ceiling price be
greater than at the$600-per-unit price ceiling?
Suppose that in Figure 4-4,the government
reduces the floor price of milk below the displayed
\(0.10-per-pound floor price,to\)0.08 per pound.
Will the excess quantity of milk supplied increase
or decrease asaconsequence?
Consider the information in Problem 4-9 and your
answers to that question.Suppose that the market
clearing price of Pakistani wheat in the absence of
price supports is equal to$0.10 per kilogram.At
this price,the quantity of wheat demanded is 12
billion kilograms.Under the government wheat
price-support program,how much more is spent
each year on wheat harvested in Pakistan than oth
erwise would have been spent in an unregulated
market for Pakistani wheat?
Suppose that in Figure 4-4, the government raises
the floor price of milk above the displayed
\(0.10-per-pound floor price, to \)0.12 per pound.
Will the excess quantity of milk supplied increase
or decrease as a consequence?
In 2016,the government ofanation establisheda
price support for wheat.The government's sup
port price has been above the equilibrium price
each year since,and the government has pur
chased all wheat over and above the amounts that
consumers have bought at the support price.
Every year since 2016,there has been an increase
in the number of wheat producers in the market.
No other factors affecting the market for wheat
have changed.Predict what has happened every
year since 2016,to each of the following:
a.Amount of wheat supplied by wheat producers
b.Amount of wheat demanded by all wheat con
sumers
c.Amount of wheat purchased by the government
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