The Demand and Supply Functions of the Food Grains in Country

question 27

Essay

The demand and supply functions of the food grains in country X are as follows:
Q_D = 150 - 0.6P
Q_S = -40 + 0.5P
where Q_D and Q_S are in millions of tons and P is the price per ton. The world price of grain is $200 per ton. The figure given below illustrates the demand and supply functions of food grains in country X.
a.In a situation of free trade, how much food grains would be produced, consumed, and traded in country X?
b.As a response to alleged unfair foreign practices, the U.S.farmers successfully lobby for a $20 export subsidy per ton of the grains exported.Assuming that country A is a "small country" in the world grain markets, and that imports of food grains are banned, illustrate the impact of the export subsidy on domestic prices, consumption, production, and exports of grain by this country.Also indicate the welfare effects on producers and consumers.Calculate the cost of the subsidy to the government, and the overall change in welfare in country A.

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Definitions:

Defense of Marriage Act

A U.S. federal law enacted in 1996 that defined marriage for federal purposes as the union between one man and one woman, and allowed states to refuse to recognize same-sex marriages granted under the laws of other states.

Obergefell v. Hodges

A landmark Supreme Court case that ruled state-level bans on same-sex marriage unconstitutional, effectively legalizing same-sex marriage across the United States.

United States v. Windsor

A landmark 2013 Supreme Court case that struck down Section 3 of the Defense of Marriage Act (DOMA), granting same-sex marriages federal recognition.

Immigration

The process of settling down permanently in a country other than one's own.