Government moves to a deficiency payment scheme

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a) Suppose that the demand curve for corn is Q = 120 - 10p and the supply curve is Q = 10p. The government imposed a specific tax of $1 per unit. What effect does this tax have on consumer surplus, producer surplus and welfare and DWL?

b) Suppose that the demand curve for wheat is Q = 100 - 40p and the supply curve is Q = 40p. The government provides producers with a price support at Ps = $2 per unit. What effect does this policy have on consumer surplus, producer surplus and welfare and DWL? How do the effects change if the government moves to a deficiency payment scheme?

Reference no: EM131644793

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