Producers have extremely high production costs

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Reference no: EM13836321

Japanese rice producers have extremely high production costs, in part due to the high opportunity cost of land and to their inability to take advantage of economies of large-scale production. Now an economist is trying to analyze two policies which aim to maintain Japanese rice production:

(I) The first policy: a per-pound subsidy to farmers for each pound of rice produced;

(II) The second policy: the per-pound tariff on imported rice.

(a) Please illustrate the supply-and-demand diagrams and label (i) the equilibrium price and quantity, (ii) domestic rice production, (iii) government revenue or deficit, (iv) the deadweight loss from each policy.

(b) Which policy would be favored by Japanese government according to your analysis? Why?

Reference no: EM13836321

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