Show who gains and who loses

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The United States not only subsidizes producers of cotton (in several ways, including a water subsidy and a price support) but pays $1.7 billion to U.S. manufacturers to buy American cotton. It has paid $100 million each to Allenberg Cotton and Dunavant Enterprises and large amounts to more than 300 other firms (Elizabeth Becker, "U.S. Subsidizes Companies to Buy Subsidized Cotton," New York Times, November 4, 2003, C1, C2). Assume for simplicity that specific subsidies (dollars per unit) are used. Use a diagram to show how applying both subsidies changes the equilibrium from the no-subsidy case. Show who gains and who loses.

Reference no: EM131345595

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