Question

Attempts: Average: /3 daSpeial-interest groups, lobbying, and rent-seeking behávior The following graph shows the market for milk Use the graph input tool to help you answer the following questions. rou will not be graded on any changes you make to this graph Note: Once you enter a value in a white field, the graph and any corresponding amounts in the grey field will change ac?ordingly Graph Input Tool Price Dollars per gallon) Quantit demanded 50 Quantit Millions of gallons) supplied Millions Surplus (Millions of gallons) gallons) 0 Shortage 40 Millions QUANTITY (Milens of galions) allons The market price of milk without government intervention is $5 per gallon Consider legislation that doesn't allow the price of milk to be below $4 per gallon and stipulates that the government buy any surplus milk produced at that price. In order to raise the price to $4 per gallon, the government would need to buy 20 million gallons of milk, which would cost the government Suppose there are only a few dairy farmers who would benefit from this legislation and millions of consumers who would suffer through higher prices. In this case, legislation imposing price supports at $4 per gallon would mean which of the following? The legislation will be easily defeated because the increašed price of milk would hurt millions of consumers, who would not reelect their representatives The legislation should pass because it is economically efficient, but it probably won't because consumers don't understánd enough about economics The legislation may or may not pass since the benefits and costs of the legislation are concentrated among similarly sized groups. The legislation will probably pass because its benefits are co?centrated while its costs are widespread

I'm not sure if the 2 questioned with the filled blanks are right or not either. So please answer all the questions

Answer 1

$3
(It is determined at the intersection of demand and supply.)

20 million; $80 million
(At $4, supply = 40 and demand = 20. So, government needs to buy 40 - 20 = 20 million at a cost of 4*20 = $80 million.)

The legislation will probably pass because its benefits are concentrated while its costs are widespread.
(As benefits are concentrated and costs are shared by a large number of people so this legislation will probably pass.)