Question

Suppose the government wants to help the coffee industry, where many producers earn relatively little. It is considering two possible policies to try to do this.
A. The first policy is a subsidy of a certain amount for each unit of coffee sold, physically paid to the seller. How would this policy affect the price of coffee paid by consumers, the after-subsidy price received by producers, and the quantity of coffee sold?
B. The second policy is a binding price floor on the price of coffee. How would this policy affect the price of coffee and the quantity of coffee sold?C. Would the policy in part (a) necessarily increase the total revenues of coffee producers (including their revenues from the subsidy)? What about the policy in part (b)?

Answer 1

Answer:

i think your answer is A