Suppose that the government gives rose producers a specific subsidy of s = 11¢ per stem. (Figure
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Figure 9.5: Welfare Effects of a Specific Tax on Roses
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S+ 11¢ s t=11¢ A 32 в 30 T= 113 Domand 21 1.16 1.25 Q, Billions of rose stems per year p.¢ per stem No Tax Specific Tax Change ($ millions) Consumer Surplus, CS Producer Surplus, PS A+B+C -B- C=-24.1 = ACS -D- E=-108.45 = APS B+ D= 127.6 = AT -C- E=-4.95 = DWL D+E+F Tax Revenue, T= tQ Welfare, W= CS + PS + T B+D A+ B+ C+D+ E+ F A +B+D+ F
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The specific subsidy shifts the supply curve S in the figure below down by s 11 to the curve labeled ...View the full answer
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Microeconomics Theory and Applications with Calculus
ISBN: 978-0133019933
3rd edition
Authors: Jeffrey M. Perloff
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