In the market for cotton, suppose the equilibrium price is $10 per tonne and the equilibrium quantity is 100 tonnes. If the government then imposes a price support of $20 per tonne,

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When the government imposes a price support of $20 per tonne, it creates a price floor. This means that the price cannot fall below $20 per tonne. However, at this price, the quantity demanded decreases to 80 tonnes, while the quantity supplied increases to 120 tonnes. This creates a surplus of 40 tonnes (120-80=40). The marginal cost of producing this additional 40 tonnes exceeds the marginal benefit, as there is no demand for it at the $20 price point. Therefore, there is an inefficient allocation of resources, and the market is not as efficient as it was at the equilibrium price and quantity.

In the Market for Cotton, Suppose the Equilibrium Price Is