Section II: Short Answer

1. (8 points) Answer parts (a) - (f) based upon the graph below(click the link at the bottom of the question), which shows demand and supply of corn.

Assume that the government sets a $2.20 per bushel price floor on corn.

a. How much corn will consumers purchase?

b. How much corn will producers supply?

c. Will there be surplus or a shortage of corn? How large will it be?

d. What is the equilibrium price and output of corn?

e. With the price floor what will be the total revenue going to farmers?

f. How much must the government spend in order to maintain the price at $2.20 per bushel?