Question: 1. a. Explain the social efficiency by taking into account consumer surplus and producer surplus. (20 point) b. Consider a free market with demand equal

1. a. Explain the social efficiency by taking into account consumer surplus and producer surplus. (20 point) b. Consider a free market with demand equal to Q=1200 - 10P and supply equal to Q=20P. What is the value of consumer surplus? What is the value of producer surplus? (5 point) c. Now the government imposes a $10 per unit subsidy on the production of the good. What is the consumer surplus now? The producer surplus? Why is there a deadweight loss associated with the subsidy, and what is the size of this loss? (5 point)

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