The graph to the right shows the supply and demand for coffee in a small town....

 

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The graph to the right shows the supply and demand for coffee in a small town. a. Calculate the dollar value of consumer, producer, and total surplus with the market in equilibrium. Show your work. Consumer Surplus = Producer Surplus = Total Surplus = Price of coffee (per lb) $22.00 $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 0 B C D w G S Quantity of coffee (lbs) b. Now suppose the government imposes a price floor of $14 per pound of coffee. Draw the price floor on the graph and clearly label the new quantities supplied and demanded. What is the new quantity sold with the price floor in place? D 20 40 60 80 100 120 140 160 180 200 c. What disequilibrium situation is created by the price floor, and what is its magnitude? Label this surplus or shortage on the graph. d. Next we'll conduct a welfare analysis of the intervention using the letters labeled on the graph. In each box, list the letters that represent the relevant areas (for example: "X+Y+Z"). In the "change" column, specify whether each increased, decreased, or stayed the same with the policy in place. No need to calculate any values. Consumer Surplus Producer Surplus Total Surplus Equilibrium With Price Floor Change e. Summarize what happened to surplus when the price floor was put in place. Who benefited, and who was hurt by the policy? f. Does the price floor cause deadweight loss (DWL)? If so, which area does it represent? List the letters, then calculate the dollar value by finding the area of that region on the graph. g. What is the policy goal of a price floor? Based on your analysis above, was that goal achieved with this policy? How do you know? The graph to the right shows the supply and demand for coffee in a small town. a. Calculate the dollar value of consumer, producer, and total surplus with the market in equilibrium. Show your work. Consumer Surplus = Producer Surplus = Total Surplus = Price of coffee (per lb) $22.00 $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 0 B C D w G S Quantity of coffee (lbs) b. Now suppose the government imposes a price floor of $14 per pound of coffee. Draw the price floor on the graph and clearly label the new quantities supplied and demanded. What is the new quantity sold with the price floor in place? D 20 40 60 80 100 120 140 160 180 200 c. What disequilibrium situation is created by the price floor, and what is its magnitude? Label this surplus or shortage on the graph. d. Next we'll conduct a welfare analysis of the intervention using the letters labeled on the graph. In each box, list the letters that represent the relevant areas (for example: "X+Y+Z"). In the "change" column, specify whether each increased, decreased, or stayed the same with the policy in place. No need to calculate any values. Consumer Surplus Producer Surplus Total Surplus Equilibrium With Price Floor Change e. Summarize what happened to surplus when the price floor was put in place. Who benefited, and who was hurt by the policy? f. Does the price floor cause deadweight loss (DWL)? If so, which area does it represent? List the letters, then calculate the dollar value by finding the area of that region on the graph. g. What is the policy goal of a price floor? Based on your analysis above, was that goal achieved with this policy? How do you know?

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a Equilibrium calculation 1 Consumer surplus is calculated as the sum of the areas A B C and D 2 Area A is a rectangle with base of 40 lbs and height ... View the full answer