09-05 Explain how governments try to encourage production of goods and services;such as education;that carry external benefits.
09-18 Providing Subsidies
The following graph refers to a province's day care market which is in equilibrium:

-Refer to the above graph 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)$450.
C)$500.
D)$550.
E)$650.

Question

09-05 Explain how governments try to encourage production of goods and services;such as education;that carry external benefits.
 09-18 Providing Subsidies
The following graph refers to a province's day care market which is in equilibrium:
 
-Refer to the above graph 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)$450. 
C)$500. 
D)$550. 
E)$650.

Quizplus · Accepted Answer

The subsidy effectively lowers the cost of providing daycare services by $150 for each child, encouraging daycare operators to offer more spaces at a lower price to parents. This shifts the supply curve to the right, leading to a new equilibrium where the fee that parents pay is reduced. Without seeing the graph, the exact new equilibrium fee cannot be determined precisely, but if the original equilibrium was at a higher fee, a $150 subsidy per child would lower the fee parents pay, making $450 a plausible new equilibrium fee assuming it reflects a significant reduction from a higher original fee.

09-05 Explain How Governments Try to Encourage Production of Goods