Question: Suppose that due to surprisingly favorable weather in one part of the country, the supply of wheat this year is much greater than expected. Farmer...

Suppose that due to surprisingly favorable weather in one part of the country, the supply of wheat this year is much greater than expected. Farmer Jane, a wheat farmer in a different part of the country who based her decision of how much to plant in part on an expected price that didn't account for this increase in supply, is not too worried because there is a price floor for her product set at $$5$ per bushel. At this price her costs will be covered. Although Farmer Jane will benefit from this price floor, society as a whole will not due to social surplus loss.

The sum of which two areas represents the lost social surplus $($deadweight loss$)$ from this price floor? Please use the areas from the image $($K$,$L$,$M$,$N$,$O$,$P$)$ in your answer $($and not numeric calculations$).$

Supply and demand curves for the Wheat market with a price floor.

This supply and demand graph is labeled Market for Electricity. On the Y axis is price per bushel in USD. On the x axis is quantity in million bushels. demand and supply cross at price equals $$4$ and quantity equals $1900$ million. There is a price ceiling line that runs horizontal from price $$3$ and touches the supply curve and another line going vertical that meets this point from quantity equals $1500$ million. There is a price floor line that runs horizontal from price $$5$ and touches the demand curve and another line going vertical that meets this point from quantity equals $1500$ million.

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In a market diagram a price floor set above the equilibrium price causes a surplus of goods because ... View the full answer