Reference: Ref 6-10 (Figure: Supply and Demand with Subsidy) Refer to the figure. What is the total cost of the subsidy for taxpayers?
A) $400
B) $800
C) $3,200
D) $2,400

Question

Reference: Ref 6-10 (Figure: Supply and Demand with Subsidy) Refer to the figure. What is the total cost of the subsidy for taxpayers?
A) $400 
B) $800 
C) $3,200 
D) $2,400

Quizplus · Accepted Answer

To calculate the total cost of the subsidy for taxpayers, we need to find the subsidy amount per unit and then multiply it by the total quantity demanded (Qd). The subsidy amount per unit is $4 ($14 - $10). The total quantity demanded (Qd) is 200 units. Therefore, the total cost of the subsidy is $4 x 200 = $800, which is the answer option B.