Question

Text Exercise 5.4 Question Help- Suppose that the demand curve for wheat is Q-100-10p and that the supply curve is Q 10p What are the effects of a subsidy (negative tax) of s2 per unit paid to producers on the equilbrium, govemment subsidy cost, consumer surplus (CS) producer surplus (PS), welfare (W), and deadweight loss (DWL? With the subsidy, the equilibrium price is $4 and the equilibrium quantity is 60 units (Enter your responses as whole numbers) The cost of the subsidy to the govemment is Enter your response as e whole number)

Answer 1

Cost of the subsidy to the government=2*60=120

Os = lop Op=100-lop Os=lop Eqm is achieved when do os 100-10P=10P P=1005 40-50 After Subsidy of & D=100-10PB os=lops = 10 (PB+2) 100-lolB=10 Petzo 80-PB = 4 4 Ps= 6. wir subsidy en penie=ut * fy = foush Pincs= area grfte - s01+ 4 xlxlo 55 pin P.S= area btc = ss your cost expenditun = 2x60=120 DW2= are da £xlox2a 10 so 6o Last Price = 4 A Equody = 60