Question

10 pts). ving (choose 3 of the next 4 problems to solve. Each is worth 20-30 8. The demand for Christmas wreaths is: P The supply of Christmas wreaths is: P-Q Where Q is thousands. a. What price and quantity characterize equilibrium in the wreath market? (2 pts) Suppose the govemment implements a subsidy of $4 per wreath. What is the new equilibrium quantity of wreaths? How much would a consumer have to pay for a wreath? What is the after-subsidy price received by suppliers. (2 pts) c. Calculate the deadweight loss from the subsidy by completing the table below (4 pts). No Tax With Tax Gain (Loss) CS PS Taxpayers/Govenment Deadweight LOSS Suppose the hanging of wreaths in one's porch generates a pleasant odor that neighbors around the wreath farms enjoy. If this were true, would the deadweight loss from the subsidy be higher or lower than what you calculated in part (c)? (2 pts) d.

Answer 1