Question: Suppose the U.S. market demand for peanuts is Q_d=3-.0025P where Q is yearly quantity demanded for peanuts in millions of tons and P is price per ton in dollars and cents. Assume the market supply curve is Q_s=.008P. Also assume that the market for peanuts can be represented by the perfect competition model.

a. Calculate the market clearing price and quantity. Illustrate in a diagram.

b. Calculate the producer and consumer surplus generated by the market.

Now suppose the US Department of Agriculture establishes a peanut production quota of 1.5 million tons this year.

c. Calculate and illustrate the market price that would equate quantity demanded with the quantity supplied quota.

d. Calculate the loss in consumer surplus due to the quota.

e. Calculate the net gain in producer surplus.

f. Calculate and explain the deadweight loss of the program.