Exhibit 16.3

-Refer to Exhibit 16.3,which shows the market for wool.Suppose the government introduces a variety of policies that set floor prices for wool at $6.As a result of the price support,the typical consumer-taxpayer in effect pays _____ for each pound of wool actually purchased.

Question

Exhibit 16.3
 
-Refer to Exhibit 16.3,which shows the market for wool.Suppose the government introduces a variety of policies that set floor prices for wool at $6.As a result of the price support,the typical consumer-taxpayer in effect pays _____ for each pound of wool actually purchased.

Quizplus · Accepted Answer

The price floor set at $6 means the government buys any surplus at this price. If the market price without intervention is $5, the government pays $1 extra per pound to support the price. The consumer pays $6 directly, and the taxpayer covers the $1 subsidy, totaling $12 per pound.

Exhibit 16.3 -Refer to Exhibit 16.3,which Shows the Market for Wool.Suppose the Market