Problem - The U.S. Department of Agriculture guarantees dairy producers that they will receive at least $1.00 per pound of butter they supply to the market. Below is the current monthly demand and supply schedule for wholesale butter (in millions of pounds per month).
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Wholesale Butter Market
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Price (dollars per pound)
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Quantity of Butter Demanded (millions of pounds)
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Quantity of Butter Supplied (millions of pounds)
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$0.80
|
107
|
63
|
|
0.90
|
104
|
71
|
|
1.00
|
101
|
79
|
|
1.10
|
98
|
87
|
|
1.20
|
95
|
95
|
|
1.30
|
92
|
103
|
|
1.40
|
89
|
111
|
|
1.50
|
86
|
119
|
|
1.60
|
83
|
127
|
|
1.70
|
80
|
135
|
|
1.80
|
77
|
143
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a. In the butter market, the monthly equilibrium quantity is million pounds and the equilibrium price is $ per pound.
b. What is the monthly surplus created in the wholesale butter market due to the price support (price floor) program?