The following information concern the market for milk: Market demand equation (D): P = 470-0.5Q...

 

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The following information concern the market for milk: • Market demand equation (D): P = 470-0.5Q • Market supply equation (S): P = 188 + Q • Price at equilibrium (P*): 376 • Quantity at equilibrium (Q*): 188 The government wants to protect milk producers by introducing a price floor of 450. This lead to a strong reduction of quantity traded, to 40. To avoid such a drop, after a few months, the government decides to decrease this price floor to 380. The quantity traded increases to 180. When the price floor was 450, there was a welfare loss. When the price floor is changed to 380, there is still a welfare loss. By how much has the welfare loss declined ? Select one: a. 19740 b. 16'380 OC. 7'450 Od. Information is missing to answer The following information concern the market for milk: • Market demand equation (D): P = 470-0.5Q • Market supply equation (S): P = 188 + Q • Price at equilibrium (P*): 376 • Quantity at equilibrium (Q*): 188 The government wants to protect milk producers by introducing a price floor of 450. This lead to a strong reduction of quantity traded, to 40. To avoid such a drop, after a few months, the government decides to decrease this price floor to 380. The quantity traded increases to 180. When the price floor was 450, there was a welfare loss. When the price floor is changed to 380, there is still a welfare loss. By how much has the welfare loss declined ? Select one: a. 19740 b. 16'380 OC. 7'450 Od. Information is missing to answer

Answer rating: 100% (QA)

Answer b 16 380 There is a welfare loss because the quantity traded is less than the quantity that w... View the full answer