Sugar Price Controls. The equilibrium price of sugar is $8, and the equilibrium quantity is 300 million tons per month. Suppose the government sets a maximum price of $7.50. For producers, each $0.01...

Sugar Price Controls. The equilibrium price of sugar is $8, and the equilibrium quantity is 300 million tons per month. Suppose the government sets a maximum price of $7.50. For producers, each $0.01 increase in price increases the quantity supplied by 8 million tons.

a. Draw a graph to show the effects of the maximum price on the sugar market. Label the initial equilibrium point as a and the point that shows the quantity supplied under the maximum price as b.

b. How does the maximum price affect the quantity of sugar sold?