5
Question 5. (12 points) Imagine that the government is thinking about subsidizing cotton socks in order to reduce an outbreak of athlete's foot, which is resulting in many Ontario doctor visits. Suppose that the demand for cotton socks is given by
Q^(d)=20-P^(d)
, and that the supply of cotton socks is given by
Q^(s)=P^(s).1
In this setting, the government has proposed a subsidy of 4 dollars per unit of
Q
. Please fill in the following blanks, where CS abbreviates consumer surplus, PS abbreviates producer surplus, Govt abbreviates the effect on the government budget surplus (get the sign right), and DWL abbreviates (the magnitude of) deadweight loss.
\table[[,\table[[Before],[Subsidy]],\table[[After],[Subsidy]]],[CS,50,90],[PS,50,],[Govt,0],[DWL,0]]