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Economics

Consider the market for soybeans illustrated in the figure below. Assume the market is initially in equilibrium. Food prices have been rising faster than composite prices as measured by the Consumer Price Index (CPI). Suppose to limit rising food prices, policymakers regulate a price ceiling of $3.00 per bushel of soybeans.

a) Calculate the change in producer surplus due to the price ceiling.

b) Calculate the change in consumer surplus due to the price ceiling.

c) Does the price ceiling create deadweight loss? If so, how much?

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