-The Table Above Gives the Demand and Supply Schedules for Bread

question 195

Essay

-The table above gives the demand and supply schedules for bread in Bakerville. Draw the demand and supply curves. Suppose a subsidy on bread of $1 per loaf is given to bread producers.
a) How will the subsidy affect the price paid by buyers for a loaf of bread and the quantity of bread sold? Show your work on your graph.
b) How will the subsidy affect the amount sellers receive for a loaf of bread?
c) After the subsidy is granted, what is the marginal social cost of the last loaf of bread produced? What is its marginal social benefit? If there are no external costs or external benefits, is the bread market efficient once the subsidy is granted?

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Definitions:

Individual Mandate

A requirement, initially part of the Affordable Care Act, that required individuals to have health insurance or face a penalty, intended to ensure that everyone is covered by health insurance.

American Federalism

A political system in which power is divided and shared between a national, or federal, government and state governments, each with its own set of powers.

Dual Federalism

Dual Federalism is a political arrangement in which power is divided between the federal and state governments in clearly defined terms, with state governments exercising those powers accorded to them without interference from the federal government.

Cooperative Federalism

A concept of federalism in which national, state, and local governments interact cooperatively and collectively to solve common problems, rather than making policies separately.