3) Consider a commodity X whose demand function is 100-2P and which has a perfectly elastic supply curve. Initial price of the commodity is 40 $. When the government puts a subsidy of 10% on X answer the following by drawing a graph a) Find the price after the subsidy. b) How much does the government pay as subsidy? c) Is there excess burden? If so, how much?

3) Consider a commodity X whose demand function is 100-2P and which has a perfectly elastic supply curve. Initial price of the commodity is 40 $. When the government puts a subsidy of 10% on X answer the following by drawing a graph a) Find the price after the subsidy. b) How much does the government pay as subsidy? c) Is there excess burden? If so, how much?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.8P

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