Question: Please help with question 8! Below is what I got for question 7 (but not positive it is correct). Thank you for your help!! 7.

Please help with question 8! Below is what I got for question 7 (but not positive it is correct). Thank you for your help!!

7. Suppose Home is a small exporter of wheat. The world price of wheat is $12 per ton. Now suppose the Home government decides to support its domestic producer with an export subsidy of $8 per ton. Use the following figure, which represents the Home wheat market, to answer the questions below. Home Price EHome 'supply . (a) What is the quantity exported under free trade and with the export subsidy? (2 points) (b) Calculate the effect of the export subsidy on consumer surplus, producer surplus and govern- ment revenue. (3 points) (c) Calculate the overall net effect of the export subsidy on Home welfare. (2 points) 8. Refer to Problem 7, above. Rather than a small exporter of wheat, suppose that Home is a large country. Continue to assume that the free-trade world price is $12 per ton and that the Home government provides the domestic producer with an export subsidy of $8 per ton. Because of the export subsidy, the local price increases to $16, while the foreign market price declines to $8. Use the same figure from Problem 7 to answer the following questions. (a) Relative to the small-country case, why does the new domestic price increase by less than the amount of the subsidy? (2 points) (b) Calculate the effect of the export subsidy on consumer surplus, producer surplus, and govern- ment revenue. (3 points) (c) Calculate the overall net effect of the export subsidy on Home welfare. Is the large country better or worse off as compared to the small country with the export subsidy? Explain. (3 points) Home Price 24 Home 22 supply WP+S 20 18 16 14 wp 12 Home: demand NAOOO 2000 4000 6000 8000 18000 12000 QuantityHome Price 24 Home 4000 supply Wit SOF 18 16 a 14 WP12 - 10 Home: 8 demand: 6 2 2000 4000 6000 8000 10000 12000 Quantity =$49 020 58-64, 800 $ - 48,000

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