Export Subsidies and Welfare Analysis

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Question $4(25$ Points$)$ Some economists contend that the agriculture industries are heavily subsidized in the US$.$ In answering the questions below, assume that the US is a large wheat exporting country and that the Rest$-$of$-$the$-$World $($ROW$)$ is the large wheat importing region.

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$1.$ Use the graph below to show the wheat market effects and welfare effects of the subsidies in the wheat exports in the US$.(10$ points$)$

$2.$ In the table below, summarize the income redistribution $($welfare$)$ effects of the subsidies in the wheat exports from the US using the corresponding letters or numbers for the areas on your graph above. $(10$ points$)$

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$$ US$$ World$$ ROW

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Change in Consumer Surplus$$

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Change in Producer Surplus$$

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Change in Gov't Cost$/$Revenues$$

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Net Welfare Effects$$

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$3.$ Imagine that instead of analyzing the welfare effects of export subsidies, you were asked to analyze the likely effects of import subsidies in a large importing country.$$ What would be the main difference in terms of welfare effects? $(5$ points$)$ Export Subsidies and Welfare Analysis

Question $4(25$ Points$)$ Some economists contend that the agriculture industries are heavily subsidized in the US$.$ In answering the questions below, assume that the US is a large wheat exporting country and that the Rest$-$of$-$the$-$World $($ROW$)$ is the large wheat importing region.

$1.$ Use the graph below to show the wheat market effects and welfare effects of the subsidies in the wheat exports in the US$.(10$ points$)$

$2.$ In the table below, summarize the income redistribution $($welfare$)$ effects of the subsidies in the wheat exports from the US using the corresponding letters or numbers for the areas on your graph above. $(10$ points$)$

US

World

ROW

Change in Consumer Surplus

Change in Producer Surplus

Change in Gov't Cost$/$Revenues

Net Welfare Effects

$3.$ Imagine that instead of analyzing the welfare effects of export subsidies, you were asked to analyze the likely effects of import subsidies in a large importing country. What would be the main difference in terms of welfare effects? $(5$ points$)$