The supply curves of three branches of Great Power are given by the following equations:

i. Q1 = - 200 + 2P

ii. Q2 = - 500 + 2.5P

iii. Q3 = - 1000 +2P

Where Q is the quantity (in 1000s of electric kilowatts) supplied, and P is the price per kilowatt.

The demand curves of three companies that consume electricity from the three branches of Great Power are given by the following equations:

i. Q1 = 4000 -2P

ii. Q2 = 3000 - 3P

iii. Q3 = 600 - 2P

Suppose now that the government introduces a subsidy (rather than a tax) of $20 per kilowatt to encourage Great Power to supply electricity from wind/solar energy. While showing your calculations, depict your responses to the following questions in a separate graph.

K. How much does the government spend on the subsidy?

L. How do consumer and producer surpluses change due to the subsidy?

M. What is the deadweight loss associated with the subsidy?

N. As a public manager, advise the government about whether or not to keep/increase/decrease the subsidy. Base your advice on the criterion of (i) allocative efficiency and (ii) the elasticity of demand and supply curves in the graph.