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Hi! The below question has multiple steps, but I would appreciate any help, thank you!! 1 - Assume that the EU subsidizes the exports of

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Hi! The below question has multiple steps, but I would appreciate any help, thank you!!

1 -

image text in transcribed
Assume that the EU subsidizes the exports of tomatoes to support employment in agriculture. Supply and demand of European producers and consumers are equal to p = 200 + qu and p = 500 qd respectively (where prices are in and quantities in tons). Under free trade, the EU is a net exporter of tomatoes and exports 30 tons every day at 475 per ton. Assume that under free trade, the global price is 475 per ton. Now, to support employment in agriculture, the EU starts subsidizing every ton of exports by about 4.2% such that the price European producers get, after the subsidy, rises from 475/ton to 495/ton. Assume the EU is a price taker and cannot affect the world price. What happens to European production once the subsidy is in place (i.e. price is 495/ton)

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