Problem 2. Recall the Government cheese example from Handout 7. Calculate the welfare effects of the US policy (price floor at $39) and the Canadian policy (quota at Q=20) for the consumers and producers. Supply 39 37 35 33 31 18 ACS APS DWL Cause of DWL 19 20 Demand Price floor P = $39 I - 21 Quantity 22 23 Quota Q= 20 24

Problem 2. Recall the Government cheese example from Handout 7. Calculate the welfare effects of the US policy (price floor at $39 ) and the Canadian policy (quota at Q=20 ) for the consumers and producers. Problem 4. Government cheese cont'd. In the late 1970s, in order to support dairy farmers the government offered to buy cheese at $39 per a 40 -pound block. This policy created a persistent excess supply of cheese. Suppose that instead of imposing the price floor, the government introduced a quota that brought the market price of cheese to $39. Use the data from the previous