Questions

a. The most common example of a market with perfect competition is agriculture. How could farm subsidies distort a model of perfect competition? Explain.

b. American corn farmers receive billions of dollars in taxpayer subsidies each year. These subsidies allow them to sell their grain at prices below what it costs to produce it, particularly for export markets. How do U.S. corn subsidies hurt Mexican farmers? What could be done to address this problem, and why would the solution be effective?

Summarize the arguments both in favor of and against eliminating farm subsidies. After your evaluation, where do you stand on this issue and why?