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1) The market demand function for corn is Qd= 15 - 2Pand the market supply function is Qs= 5P- 2.5, both measured in billions of bushels per year. Suppose the government imposes a $2.10 tax per bushel. What will be the effects on aggregate surplus, consumer surplus, and producer surplus? What will be the deadweight loss created by the tax?
2) The market demand and supply functions for corn are the same as question 1 Suppose the government wants to raise the price of corn to $3. What are the welfare effects of a price floor, price support, production quota, and voluntary production reduction program?
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