# 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) 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…

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.