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Suppose that a supply function is described as follows. When the price is 1300 (mea- sured in dollars), the quantity supplied is 20. In addition, when the price is 2500, the quantity supplied is 50.
(a) Write out the supply function in P= f (Q) form.
(b) Plot this supply function. Label the axes, the curve, and two points on the curve.
(c) Now assume that this represents the supply of corn, in bushels. At a quantity of 40 are the firms willing to accept a price of 2000? Explain
(d) Assume that consumers want to pay 2000 for 40 bushels of corn. The government wants to make this happen by either taxing the farmers, or giving them a subsidy. (The tax or subsidy will apply to every quantity for the corn farmers.) Which will it be, and what will be its value? Illustrate on your graph.
(e) What is the equation for the new supply curve you illustrated on the graph?
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