The market demand functions for corn is Qd = 15 – 2P, and the supply function of corn is Qs= 5P – 2.5. Suppose the government gives corn farmers a $0.70 subsidy per bushel of corn. What will be the effects on aggregate surplus, consumer surplus, and producer surplus? What will be the deadweight loss created by this subsidy? [HINT: This problem is exactly the same as the tax problem we did in class. Only difference is that with a subsidy of $0.70, ps = pb + 0.70.]
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The market demand functions for corn is Qd = 15 – 2P, and the supply function of corn is Qs= 5P – 2....
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