The Supply and Demand Curves for Corn Are as Follows

question 142

Essay

The supply and demand curves for corn are as follows:
Q_D = 3,750 - 725P
Q_S = 920 + 690P,
where Q = millions of bushels and P = price per bushel.
a. Calculate the equilibrium price and quantity that would prevail in the free market.
b. The government has imposed a $2.50 per bushel support price. How much corn will the government be forced to purchase?
c. Calculate the loss in consumer surplus that would occur under the support program.

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