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, then producer surplus will be ________ per day.
A)$0
B)$1,000
C)$4,000
D)$8,000

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, then producer surplus will be ________ per day.
A)$0 
B)$1,000 
C)$4,000 
D)$8,000

Quizplus · Accepted Answer

There is no producer surplus when supply is a horizontal line at price because there is no difference between price and the supply curve.

Suppose a Small Island Nation Imports Sugar for Its Population