Answer to Question #47749 in Microeconomics for Neemaneema
(a) Equilibrium prices and quantity.
(b) Consumer and producer surplus.
(c) Government expenditure.
(a) Equilibrium quantity will increase, because the supply will increase, so equilibrium quantity will decrease.
(b) Both consumer and producer surplus will increase after increase of supply.
(c) Government expenditure will increase, as it subsidies the producers.
(d) Welfare will increase, as consumer and producer surplus increases and price decreases.
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