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2. The Department of Agriculture maintains a price floor for tobacco farmers, which raises the price...

2. The Department of Agriculture maintains a price floor for tobacco farmers, which raises the price of tobacco above equilibrium price. (9 points)

a. Draw the market demand and supply curves for tobacco before implementation of the price floor. Label the equilibrium price and quantity.

b. On the same graph depict the price floor, the resulting surplus or shortage of tobacco.

c. On the same graph show the reduction in consumer surplus as a result of the price floor policy.

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