Suppose that in Figure 4-4, the government reduces the floor price of peanuts below the displayed $500-per-ton floor price, to $400 per ton. Will the excess quantity of peanuts supplied increase or decrease as a consequence?

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FIGURE 4-4 Agricultural Price Supports Free market equilibrium occurs at E, with an equilibrium price of $400 per ton and an equilibrium quantity of 3 million tons. When the government sets a support price at $500 per ton, the quantity demanded is 2.5 million tons and the quantity supplied is 4.5 million tons. The difference is the surplus, which the government buys. Price per Ton ($) 500 400 Excess quantity supplied (surplus at $500 price) E LLI 2.5 3 Millions of Tons of Peanuts per Time Period 4.5 S