1. How exactly agricultural subsidies in the U.S. affect the U.S. market for crop?

Draw the corresponding demand-supply diagram for the U.S. market for crop to explain your reasoning.

Figure 1 U.S. Subsidies Reduce African Exports P S P* P* * - - - - I- PD - - ---/. - - - - - - D QD QD Q's Q Q U.S. farm subsidies reduce the world price of this crop from P* to P**. Exports from this African country fall from Qs-QD to Q's-Ob