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            200                     100                     100 200 300 400 500 600 700 800 900 1000 c) (6 points) Calculate the Consumer Surplus before and after the price ceiling. Are consumers better or worse off? CS before _______ CS after ________ Consumers are better/worse off (circle one) 6
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2. (16 points) The government recently decided to eliminate farm subsidies to corn farmers. Specifically, the government will no longer pay farmers $1 per bushel of corn produced. Additionally, the Food and Drug Administration (FDA) announced in a study last week that corn may cause cancer. Assume farmers can store corn for long periods of time. a) (6 points) Graph this situation in the space below. Be sure to clearly label the entire graph and show any changes in supply and demand. b) (1 pt). What effect did the elimination of the subsidy have on demand in the corn market? (circle one) Demand Demand No Effect b) (1 pt). What effect did the elimination of the subsidy have on supply in the corn market? (circle one) Supply Supply No Effect c) (1 pt). What effect did the FDA study have on demand in the corn market? (circle one) Demand Demand No Effect c) (1 pt). What effect did the FDA study have on supply in the corn market? (circle one) Supply Supply No Effect d) (6 pts). What is the overall effect of these two scenarios on the market for corn (circle one response for price and one for quantity) Price: Increase Decrease Indeterminate Quantity: Increase Decrease Indeterminate 7
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