Exhibit 16-2
-Refer to Exhibit 16-2. How much of a surplus of wool does the $6 price support generate?

Question

Exhibit 16-2 
-Refer to Exhibit 16-2. How much of a surplus of wool does the $6 price support generate?

Quizplus · Accepted Answer

At the equilibrium price of $4, the quantity of wool demanded is 400 million pounds and the quantity of wool supplied is 340 million pounds. Therefore, there is a shortage of 60 million pounds. At a price of $6, the quantity of wool demanded falls to 300 million pounds, while the quantity of wool supplied rises to 360 million pounds. This generates a surplus of 60 million pounds ($6 - $4) * 60 million pounds = $120 million worth of wool.

Exhibit 16-2 -Refer to Exhibit 16-2. How Much of a Surplus of a Surplus