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 quantity?
A)3,000.
B)5,000.
C)7,000.
D)8,000.
E)9,000.

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 quantity?
A)3,000. 
B)5,000. 
C)7,000. 
D)8,000. 
E)9,000.

Quizplus · Accepted Answer

With the newly introduced subsidy of $150 per child, the daycare operators' cost of providing an additional daycare space will decrease. 
At the original equilibrium, the marginal private benefit of providing daycare spaces was equal to the marginal private cost. 
With the subsidy, the marginal private cost to the daycare operator will decrease, causing a leftward shift in the marginal private cost curve. 
The new equilibrium will occur at the intersection of the original marginal private benefit curve with the new marginal private cost curve, which occurs at a quantity of 8,000 daycare spaces. Therefore, the new equilibrium quantity will be 8,000.

The Following Table Shows the Marginal Private Benefits and Marginal