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Suppose the marginal value of a square foot of factory space is constant at $1.00. The marginal benefit of a square foot of housing space is $1.00 for 1,000 square feet and $0.80 for 1,200 square feet. Suppose the government provides a 20 percent mortgage subsidy, cutting the net price of housing to consumers from $1.00 to $0.80 per square foot. a. Use a graph like Figure 15–6 to show the deadweight welfare loss resulting from the mortgage subsidy. b. The deadweight loss is _____ , computed as… c. For the typical consumer, the consumer-surplus gain from the subsidy is _____ , computed as… d. The revenue loss for the government is _____ , computed as… e. The revenue loss is [greater, less] than the consumer-surplus gain because…
Chapter 15, Problem 8(choose chapter or problem)
Deadweight Loss from the Mortgage Subsidy
Suppose the marginal value of a square foot of factory space is constant at $1.00. The marginal benefit of a square foot of housing space is $1.00 for 1,000 square feet and $0.80 for 1,200 square feet. Suppose the government provides a 20 percent mortgage subsidy, cutting the net price of housing to consumers from $1.00 to $0.80 per square foot.
a. Use a graph like Figure 15–6 to show the deadweight welfare loss resulting from the mortgage subsidy.
b. The deadweight loss is _____ , computed as…
c. For the typical consumer, the consumer-surplus gain from the subsidy is _____ , computed as…
d. The revenue loss for the government is _____ , computed as…
e. The revenue loss is [greater, less] than the consumer-surplus gain because…
Questions & Answers
QUESTION:
Deadweight Loss from the Mortgage Subsidy
Suppose the marginal value of a square foot of factory space is constant at $1.00. The marginal benefit of a square foot of housing space is $1.00 for 1,000 square feet and $0.80 for 1,200 square feet. Suppose the government provides a 20 percent mortgage subsidy, cutting the net price of housing to consumers from $1.00 to $0.80 per square foot.
a. Use a graph like Figure 15–6 to show the deadweight welfare loss resulting from the mortgage subsidy.
b. The deadweight loss is _____ , computed as…
c. For the typical consumer, the consumer-surplus gain from the subsidy is _____ , computed as…
d. The revenue loss for the government is _____ , computed as…
e. The revenue loss is [greater, less] than the consumer-surplus gain because…
ANSWER:Step 1 of 6
Given data:
Suppose the marginal value of a square foot factory space is constant at $1.00. The marginal benefit of a square foot housing space is $1.00 for 1,000 square feet and $0.80 for 1,200 square feet. Suppose the government provides a 20 percent mortgage subsidy, cutting the net housing price to consumers from $1.00 to $0.80 per square foot.