Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides a subsidy of $500 per ton, the equilibrium price of sugar will be ________ per ton, and the equilibrium quantity will be ________ tons per day.
A)$1,000; 12
B)$1,000; 8
C)$1,500; 12
D)$1,500; 8

Question

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below.  If the government provides a subsidy of $500 per ton, the equilibrium price of sugar will be ________ per ton, and the equilibrium quantity will be ________ tons per day.
A)$1,000; 12 
B)$1,000; 8 
C)$1,500; 12 
D)$1,500; 8

Quizplus · Accepted Answer

With a subsidy of $500 per ton, the equilibrium price will be $1,000 per ton (= $1,500 − $500). At that price, the quantity demanded is 12 tons per day.

Suppose a Small Island Nation Imports Sugar for Its Population