Unformatted text preview: 2-The farmers adjust their production cost at this price. 3-The government introduces the subsidy program by setting a higher price 5 $. 4-This increase in price induced the suppliers to increase the quantity produced from Q* to Qs (over production), and also lead to decrease their private cost of producing by the amount of subsidy. 5-At A (the new production point), we don’t have efficiency because the MSC>MSB. 6-This over production could be solved by pushing the farmers to decrease their production by decreasing the price....
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This note was uploaded on 11/20/2009 for the course PUBLIC FIN no id taught by Professor Ahmed during the Spring '09 term at City.
- Spring '09