(30 pts) A researcher center hired you to estimate the economic benefit of a new variety of corn they developed. They provide some information and asked you to estimate the economic benefit of such research:

a) The new variety is ready to be in the market on January 1st of 2021 b) All farms of the region will adopt this new variety in 6 years: 0% in 2021, 20% in 2022, 20% in 2023 (adding to 40% adopted in 2023), 20% in 2024, 20% in 2025 and 20% in 2026; leading to 100% adopted by 2026 and following years. c) Corn yield will increase 30%. d) They did not spend a dollar to develop this new variety. e) The new variety will cost the same to farmers (no change in cost of production).

After doing some research you find out that corn price today is $3.00 per bushel and quantity produced is 10,000 bushels, and demand and supply elasticity of corn is -0.6 and 0.8, respectively. To accurately estimate the benefits of this new variety, you will estimate the gains over 10 years (2021, 2022, ..., 2030), which implies that = 1,2,3, ... ,10. Assume the discount rate to be 5%. Answer the questions below. In addition to the unique pdf you upload for the homework, please upload the excel file you created.

a) Show graphically the effect of such research. When plotting the graph, only show the equilibrium today and in 2030 (when all farms have adapted). Dont forget to label the axis and other key points in the graph. Provide an explanation of what is happening in the graph. (equilibrium changed? Who is benefiting from the research?)

b) Display graphically the adoption curve over the 10 years with share of the farms that have adopted in the vertical axis and years in the horizontal axis. Label the graph and explain.

c) Calculate . Then calculate where is the adoption in year . Note that this varies by year. What is the interpretation? You can use the graph in (a)

d) Calculate the change in consumer and producer surplus for each year. Constrain your analysis to 10 years 2021-2030 accounting for the adoption curve. Build a table as in the class but with 10 years.

e) What is the todays (discounted) estimate benefit for consumers and producers? (hint: Net Present Value of CS and PS). Graph both producer and consumer surplus in the same graph.

f) What is the todays (discounted) total benefit? Would this be higher or lower if adoption takes longer to reach all farmers or never reaches all farmers?