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Unformatted text preview: 2.5P.
The market supply function is QS = 10P 10,
both measured in billions of bushels per year. The initial equilibrium price is $0.72, and the initial equilibrium
quantity is 4 billion bushels. Consumer surplus is $3.02, producer surplus is $4.20, and aggregate surplus is
$7.22. Suppose the government gives corn farmers a subsidy of $0.7 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 the subsidy?
Instructions: Round yo...
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- Fall '13