Question 5 - Public Transit Subsidy In a dilferent market, a $3 road usage toll would lead to the socially optimal outcome. However, this is politically unpopular, so the decision is made to subsidize public buses instead. To replace a $3 road usage toll, the secondbest subsidy must result in a $3 reduction in the equilibrium price paid by consumers. Demand and supply in the public bus market are given by: D (Demand) PD : 44 % 5' {Supply} P3 = Q? (a Find the free market equilibrium (i.e. no subsidy) price and quantity of bus trips (13*, (2*). (b Find the equilibrium in the bus market after the subsidy is implemented (PD, PS, QU). ( ( ) ) c) Draw a supply and demand diagram showing the answers from the previous two parts. d) How much does the government spend on this subsidy? ) (e Find the deadweight loss due to this subsidy