Problem
Suppose that the government decides to guarantee an above-marketprice for a good by buying up any surplus at that above-marketprice. Using a conventional supply-demand diagram, illustrate thefollowing gains and losses from such a price support:
a. The loss of consumer surplus.
b. The gain of producer surplus in the short run
c. The cost of running the government program (assuming on storagecosts)
d. What is the total cost of the program to consumers?
e. Are the cost and benefits of the support program widespread orconcentrated?