Answer to Question #99786 in Economics for Omar

Question

Unlike the loan rate program, the target price program ($1.78/bu) is guaranteed by the government to farmers. Instead of buying wheat until the price reached the target price, the government would allow all of it to be purchased by consumers
a-Assuming that the producers decide how much wheat to grow based on the supply curves find the quantity supplied. Now use that quantity and the demand curve to find the price that consumers would pay if they were to buy that much wheat
b-Assume the government allows the producers of wheat to sell at the price determined by consumers what is the amount of government compensation to producers
c-Assume the market is free to decide the quantity supplied and quantity demand: is the free market approach better to producers, consumer, and the environment than the target price approach?

Answer 1

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