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The inverse market demand curve is P=140-Q, and the inverse supply curve is P=20+Q. Now suppose a commodity subsidy of $20 is given for each unit of production. In this new distorted market equilibrium, compute the following:
1. equilibrium demand price2. equilibrium supply price3. equilibrium quantity4. the additional value of consumption, relative to the undistorted equilibrium (i.e.)(the equilibrium without the commodity subsidy).5. the additional resource cost, relative to the undistorted equilibrium (i.e) without subsidy6. the increased consumer surplus relative to the undistorted equilibrium (i.e) withoutsubsidy.7. the increased producer surplus relative to the undistorted equilibrium (i.e) withoutsusbidy.8. The subsidy payment in dollars.9. The efficiency cost of the subsidy relative to the undistorted equilibrium (ie) withoutsubsidy.
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