The following table shows the marginal private benefits and marginal private cost of providing daycare spaces in the province:

-Refer to the above information to answer this question.In an effort to increase the number of daycare spaces,suppose the authorities give daycare operators a subsidy of $150 for each child registered.What will be the new equilibrium fee?
A)$350.
B)$550.
C)$500.
D)$450.
E)$650.

Question

The following table shows the marginal private benefits and marginal private cost of providing daycare spaces in the province:
 
-Refer to the above information to answer this question.In an effort to increase the number of daycare spaces,suppose the authorities give daycare operators a subsidy of $150 for each child registered.What will be the new equilibrium fee?
A)$350. 
B)$550. 
C)$500. 
D)$450. 
E)$650.

Quizplus · Accepted Answer

With the subsidy of $150 per child, the marginal private cost for daycare operators will decrease by $150 at every level of quantity. This means that the supply curve will shift down by $150 throughout, resulting in a new equilibrium quantity of 350 children and a new equilibrium fee of $450. This can be seen from the intersection of the new supply curve (purple) and the demand curve (blue) in the graph below:

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The Following Table Shows the Marginal Private Benefits and Marginal