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Suppose Home is a small exporter of wheat. At the world price of $100 per ton, Home growers export 20 tons. Now suppose the Home
Suppose Home is a small exporter of wheat. At the world price of $100 per ton, Home growers export 20 tons. Now suppose the Home government decides to support its domestic producer with an export subsidy of $40 per ton. Use the following figure to answer these questions. c. Suppose that instead of an export subsidy of $40 per ton, the Home government applies a subsidy of $60 per ton. Assume the domestic price after the subsidy is $140 and at a price of $80 supply would be 25 and demand would be 35 . Calculate the effect of the export subsidy on consumer surplus, producer surplus, and government revenue. d. Compare the two subsidy examples and discuss their prevalence in the world
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