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 parents a subsidy of $150 for each child registered.What will be the new equilibrium quantity?
A)9,000.
B)8,000.
C)7,000.
D)5,000.
E)3,000.

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 parents a subsidy of $150 for each child registered.What will be the new equilibrium quantity?
A)9,000. 
B)8,000. 
C)7,000. 
D)5,000. 
E)3,000.

Quizplus · Accepted Answer

The subsidy of $150 for each child registered will shift the marginal private benefit curve upwards by $150, making the new equilibrium quantity where the new demand curve intersects the original marginal private cost curve. From the graph, this new quantity is approximately 8,000 daycare spaces. Thus, the answer is B.

The Following Table Shows the Marginal Private Benefits and Marginal