B1. In a closed economy, these are the demand and supply curves in the perfectly competitive apples market QD = 9-1/4 P; Qs = 2P a) What is the welfare effect of a $2.25 subsidy on apples producers? Explain by how much consumer surplus, producer surplus and total surplus change. Who benefits most from the subsidy? b) Instead of calculating new CS and TS, are there other ways to understand who would get most of the subsidy gains. c) If the subsidy was given to consumers instead of producers, who would benefits most from it? Why?
B1. In a closed economy, these are the demand and supply curves in the perfectly competitive apples market QD = 9-1/4 P; Qs = 2P a) What is the welfare effect of a $2.25 subsidy on apples producers? Explain by how much consumer surplus, producer surplus and total surplus change. Who benefits most from the subsidy? b) Instead of calculating new CS and TS, are there other ways to understand who would get most of the subsidy gains. c) If the subsidy was given to consumers instead of producers, who would benefits most from it? Why?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter7: Consumers, Producers, And The Efficiency Of Markets
Section: Chapter Questions
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![B1. In a closed economy, these are the demand and supply curves in the perfectly competitive
apples market
Qo9-1/4 P;
Qs = 2P
a) What is the welfare effect of a $2.25 subsidy on apples producers? Explain by how much
consumer surplus, producer surplus and total surplus change. Who benefits most from the subsidy?
b) Instead of calculating new CS and TS, are there other ways to understand who would get most
of the subsidy gains:
c) If the subsidy was given to consumers instead of producers, who would benefits most from it?
Why?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F590f961d-6be4-4dc5-afd9-94e0e51d73f0%2F696504e5-3ed0-464d-b4f1-2c7f58a48dd5%2Fprtgfi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:B1. In a closed economy, these are the demand and supply curves in the perfectly competitive
apples market
Qo9-1/4 P;
Qs = 2P
a) What is the welfare effect of a $2.25 subsidy on apples producers? Explain by how much
consumer surplus, producer surplus and total surplus change. Who benefits most from the subsidy?
b) Instead of calculating new CS and TS, are there other ways to understand who would get most
of the subsidy gains:
c) If the subsidy was given to consumers instead of producers, who would benefits most from it?
Why?
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