b. Draw the subsidy in the model, be sure to indicate the price the consumer pays, the price the producer receives, and the quantity that is now exchanged in the market. Questions: ii. What happens to Consumer Surplus once the subsidy is imposed? ii. What happens to Producer Surplus once the subsidy is imposed? iv. Is the subsidy efficient? Why or Why Not!
Homework Answers
4. 1:-The price that the supplier receives is lower, but the price is not reduced by the amount of subsidy, so supplier's revenue increases.
2:- Now consumer has to pay lower price but the price is not reduced by the amount of subsidy. The benefits of subsidy is divided between supplier and consumer.
b 1 :- graph is drawn in picture included with........
2:- The consumer, who pays now a lower price gain area C. S. In new consumer surplus.
3:-The producer gains area of P. S. in new producer surplus.
4:-The total cost of the subsidy is equal to area P. S+C. S. +L.
The subsidy costs L dollars more than the benefits (P. S. +C. S).So
area L is deadweight loss and thus subsidy is inefficient here.
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multi part question 4. Agricultural export subsidies in a small nation The following graph shows the...
multi part question
4. Agricultural export subsidies in a small nation The following graph shows the market for wheat in Canada, where Dc is the demand curve, Sc is the supply curve, and Pw is the free trade price of wheat. Assume that Canada is a relatively small producer of wheat, so changes in its output do not affect the world price of wheat. Also assume that Canada is currently open to free trade, and domestic consumers are able to...
do part b Figure 1: Market for Musthaves Price $40 Supply 24 1X1 Demand 32 48...
do part b
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Please answer question B
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Please complete all questions. Question 5: Let us say that the U.S. pays import subsidy to...
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Figure 2: A Subsidy 19. What is the initial market price and quantity, before the subsidy...
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1. Consider a perfectly competitive market where the mar- ket demand curve is given by Q...
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The following graph shows the market for wheat in Canada, where Dc is the demand curve,...
The following graph shows the market for wheat in Canada, where Dc is the demand curve, Sc is the supply curve, and Pw is the free trade price of wheat. Assume that Canada is a relatively small producer of wheat, so changes in its output do not affect the world price of wheat. Also assume that Canada is currently open to free trade, and domestic consumers are able to purchase wheat at the world price with negligible transportation costs. Suppose...
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multi part question
4. Agricultural export subsidies in a small nation The following graph shows the market for wheat in Canada, where Dc is the demand curve, Sc is the supply curve, and Pw is the free trade price of wheat. Assume that Canada is a relatively small producer of wheat, so changes in its output do not affect the world price of wheat. Also assume that Canada is currently open to free trade, and domestic consumers are able to...
do part b
Figure 1: Market for Musthaves Price $40 Supply 24 1X1 Demand 32 48 72 Quantity Question 1: Use Figure 1 (The Market for Musthaves) to answer the following: b) Suppose that an event causes Musthaves to become a necessary item for most people. As a result, the number of buyers of Musthaves increases significantly and the equilibrium price rises to $28. i. Show graphically why this happens. ii. What is the new consumer surplus? How does it...
Please answer question B
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Please complete all questions.
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