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May 4, 2015

Homework Help: Economics

Posted by excel on Monday, June 23, 2014 at 3:12pm.

Suppose that a perfectly competitive market is described by the following supply and demand equations: QD = 300 P and QS = 2P. Suppose that government subsidizes this good: for each unit sold government pays $15 to the seller.

(a) What is the government expenditure on this subsidy?
(b) What is the deadweight loss as a result of this subsidy?

Thanks for your help.

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