This question uses the algebraic method of determining equilibrium from Appendix 3A. In Canada, producers of milk, poultry, and eggs are protected by government-imposed supply management rules. This supply management system is made up of a combination of import controls, production planning quotas, and minimum prices for these products. Suppose, for simplicity, the Canadian market for turkeys is described by the following demand and supply curves.

P = 30 − 0.125Q^d Demand Curve

P = 1.48 + 0.03Q^S Supply Curve

Where Q represents the monthly quantity of turkey in thousands of kilograms and the price P is the price per kilogram.

a. Suppose Canada does not have any supply management for turkey farmers. Derive the equilibrium price and quantity of turkey. Draw a diagram representing the market for turkey. Clearly label the equilibrium price and quantity. 

b. Suppose, to support the incomes of farmers who raise turkeys, the government imposes a price floor for turkeys at $9 per kilogram. Determine the resulting price paid by consumers, quantity of turkeys exchanged, and the price received by suppliers in equilibrium. Sketch this into your diagram from part (a).

c. Briefly explain how this price floor supports the income of farmers.

d. Why might the government need to also impose limitations on the quantity of turkeys imported? Explain.

e. Show that the imposition of a production quota of 168 000 kg of turkey per month results in the same price paid by consumers as the price floor in part (b). What are the resulting demand price, supply price, and quota rent?

f. Would the government (or a supply management authority) need to have the means to impose penalties for violating the price floor and/or the supply quota? Explain why or why not.

g. Would farmers who were unable to get a turkey production quota licence be pleased by this supply management system? Explain why or why not. Suppose if they wish, these farmers could rent a production quota licence from another farmer who was awarded one. Would this make these other farmers extremely happy? Explain why or why not.