Every widget producer's technology has cost function C (Q) = 80Q - 8Q2 + 1/3 Q3 The
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C (Q) = 80Q - 8Q2 + 1/3 Q3
The market demand function for widgets is
Qd = 4,400 - 100P.
Suppose the government is considering a $6 subsidy per widget sold (given to firms).
a. What would the price, market quantity, and number of active widget producers be in the long-run competitive equilibrium without the subsidy?
b. What would the price paid by buyers, market quantity, and number of active widget producers be in the long-run competitive equilibrium with the subsidy?
c. What is the deadweight loss of the subsidy?
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