UNI Economics questions

[TrueTears]

sorry, this is the production subsidy diagram with regards to importables. The other one was just a production subsidy in a competitive market.

[IMG]http://img171.imageshack.us/img171/1430/productionsubsidy2.jpg[/img]

btw i know what u mean, it's just a matter of definition on seller price, what i mean is the price sellers receive after including the payment of subsidy, you are talking about just what they receive from buyers.

[Voltaire]

^what on earth is that? It appears to be the effects of a tarrif (with the assumption that the international market price is lower that the local equilibrium price)

[TrueTears]

no it's the effects of a production subsidy on an importable good from my lecture notes. The dot points show the effects.

[lalala]

Thanks so much for your help !

[schmalex]

If you get a question like the first one on your exam, I would draw a welfare diagram for each and then describe which you think would have the smallest DWL and why. Subsisidies will have no effect on Consumer surplus, but will increase producer surplus with a DWL from the money thta the govenment spends that doesn't add to surplus. Tarrifs will decrease Consumer surplus and increase government surplus (as opposed to a loss to the government from the subsidies) as well as producer surplus. The DWL will come from the reduction in consumer surplus.