a. Explain why introducing a minimum price above the equilibrium price reduces social welfare. “A minimum price occurs when a price is set by the government and businesses cannot charge less than that price” (Gillespie, 2011) for the minimum price to be effective, it must be higher than the price of Balance - this occurs when supply and demand are balanced without taking into account all external factors. (Figure 1) (Gillespie, 2011) The formation of equilibrium occurs when the goods demanded are equivalent to the goods supplied (DS); this allows the government to set a floor price (P1); this benefits society because for the market to be efficient, the minimum price must be higher than; as when the supply produced exceeds (Q1) that demanded (Q2) by the public, this allows consumers who can afford the goods or services to purchase regardless of the prices – this is beneficial for the reduction of welfare be social as suppliers will have excess quantity, this incentivizes producers to reduce their prices towards the floor price in order to increase demand for their product or service in order to make optimal profits allowing consumers to get the best price as well as to increase consumer surplus for the original consumers. (Figure 2)([price_controls_ceiling, nd)The minimum price being lower than the equilibrium, the demand will be excessive (Qd) in relation to the produced supply (Qs), which means that for the price that buyers are ready to pay, suppliers are only willing to provide a certain quantity of goods or services; causing the loss of consumer surplus and producer surplus due to the reduced quantity manufactured, this area then becomes a loss of dead weight; this can be avoided through the relocation of resources, although this creates a situation “in which no one in an economy can improve their situation without making someone else worse off” (Nuttall and Lobley, 2001 ), known as Pareto efficiency; as a result, reducing the waste of resources which can have a negative impact by leading to an increase in social welfare and ultimately clarifies that having a minimum price above the equilibrium reduces social welfare.b. Explain why a profit-maximizing firm produces an outcome that equals marginal revenues to marginal costs (MR=MC).