Show effect of such a subsidy on welfare of various groups

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Reference no: EM131323585

After Mexico signed the North American Free Trade Agreement (NAFTA) with the United States in 1994, corn imports from the United States doubled within a year, and, in some recent years, U.S. imports have approached half of the amount of corn consumed in Mexico. According to Oxfam (2003), the price of Mexican corn fell more than 70% in the first decade after NAFTA took effect. Part of the reason for this flow south of our border is that the U.S. government subsidizes corn production to the tune of $10 billion a year. According to Oxfam, the 2002 U.S. cost of production was $3.08 per bushel, but the export price was $2.69 per bushel, with the difference reflecting an export subsidy of 39¢ per bushel. The U.S. exported 5.3 metric tons. Use graphs to show the effect of such a subsidy on the welfare of various groups and on government expenditures in the United States and Mexico

Reference no: EM131323585

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