Home insulation is currently subsidized. Draw a graph (as in Exhibit) that shows the gains and losses to all relevant groups. Explain how you could, in principle, make everyone happier by eliminating the subsidy and instead transferring income from some people to others. Be explicit about exactly who you'd take income from, how much you would take, and how you would distributeit.

Transcribed Image Text:

Before Subsidy After Subsidy Consumers Surplus Producer's Surplus Cost to Taxpayers ACF+G C +DF+H -(C+D E+F +G) Social Gain A+C F+H Deadweight Loss Quantity