-Refer to the above graph to answer this question.If buyers of this product were subsidized by an amount equal to the external benefits,what would be the equilibrium price and quantity?
A)$30 and 500.
B)$40 and 800.
C)$50 and 700.
D)$50 and 900.
E)$60 and 800.

Question

-Refer to the above graph to answer this question.If buyers of this product were subsidized by an amount equal to the external benefits,what would be the equilibrium price and quantity?
A)$30 and 500. 
B)$40 and 800. 
C)$50 and 700. 
D)$50 and 900. 
E)$60 and 800.

Quizplus · Accepted Answer

Subsidizing buyers by the amount of external benefits effectively shifts the demand curve to the right, aligning it with the social benefit curve. This results in a new equilibrium where the quantity is higher and the price that consumers are willing to pay increases, matching the point where the social benefit equals the supply. The correct equilibrium with the subsidy is therefore $50 and 900 units, as this aligns with the intersection of the social benefit curve and the supply curve.

-Refer to the Above Graph to Answer This Question