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 the cost of subsidy, which must be borne by taxpayers, will be ________ per day.
A)$500
B)$2,000
C)$5,000
D)$6,000

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 the cost of subsidy, which must be borne by taxpayers, will be ________ per day.
A)$500 
B)$2,000 
C)$5,000 
D)$6,000

Quizplus · Accepted Answer

After the subsidy, the equilibrium quantity is 12 tons per day. With a subsidy of $500 per ton, the cost of the subsidy is 12 × $500 = $6,000.

Suppose a Small Island Nation Imports Sugar for Its Population