Suppose that the government gives rose producers a specific subsidy of s = 11¢ per stem. (Figure 9.5 shows the original demand and supply curves.) What is the effect of the subsidy on the equilibrium prices and quantity, consumer surplus, producer surplus, government expenditures, welfare, and deadweight loss?
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