10. Suppose the government passes a law requiring the price to be no lower than \( \$ 75 \). What type of price control is this, what quantity is demanded, what quantity is supplied, what will be the initial result, and how large will that result be? \[ \begin{array}{l} \mathrm{QD}=-5 \\ \mathrm{QS}=\ldots 25 \end{array} \] Type of Price Control = \( \qquad \) price floor \( \qquad \) Result \( = \) \( \qquad \) surplus \( \qquad \) of 20 \( \qquad \) units 11. Would a consumer or producer special interest group ask the government to impose the above price control? How would this group benefit?

Here’s how to break down the problem: 10. The government is setting a minimum price of $75. Such a rule is called a price floor because it prevents the market price from falling below a certain level. With the imposition of the price floor, the following happens:  • Type of Price Control: It is a price floor.  • Quantity Demanded: At a price of $75, consumers demand 5 units.  • Quantity Supplied: At the same price, producers are willing to supply 25 units.  • Initial Result: Because the quantity supplied (25) exceeds the quantity demanded (5), an excess supply (or surplus) is created.  • Size of the Result: The surplus is 25 – 5 = 20 units. 11. Since this type of price floor benefits the sellers by guaranteeing them a higher price than what might prevail in an unregulated market, a producer special interest group would be the one to ask the government to impose it. Producers benefit because, even though there is now an excess supply (meaning some of their goods remain unsold), they receive the higher floor price on each unit sold and thus enjoy a higher producer surplus. Consumers, by contrast, end up paying more and buying fewer units. In summary:  10. Price floor; at $75 the quantity demanded is 5 units while the quantity supplied is 25 units, which produces an excess (surplus) of 20 units.  11. A producer special interest group would support such a price control because it allows them to receive a higher price for their goods, increasing their profits even though it results in a surplus that may require intervention (such as government purchases or other measures) to clear the market.