Final answer:
The welfare effects of government interventions like price floors, price support, production quotas, and voluntary production reduction programs in the market for corn can lead to surpluses, inefficiencies, and welfare losses due to overproduction, misallocation of resources, and increased prices for consumers.
Step-by-step explanation:
The student's question pertains to the welfare effects of various government interventions in the market for corn, such as a price floor, price support, production quota, and voluntary production reduction program, given the market demand and supply functions Qd = 15 - 0.002P and Qs = 0.005P - 2.5.
When the government sets a price floor above the equilibrium price, it can lead to a surplus of goods, as producers are willing to supply more at the higher price, but consumers are not willing to buy as much. In the case of corn, if the government wants to set the price at INR 3000, the quantity demanded at this price would be lower than the quantity supplied, leading to excess supply. This surplus results in welfare losses, as producers may overproduce corn that cannot be sold, and consumers may have to pay higher prices or switch to substitutes.
Price supports and production quotas can also distort market signals and lead to inefficiencies. By artificially maintaining high prices or limiting production, these policies can lead to misallocation of resources and potential deadweight loss. A voluntary production reduction program encourages producers to restrict their output to maintain higher prices, but this also can lead to a welfare loss as it may reduce the quantity available to consumers and raise the price.