Posted by excel on .
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.