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Figure: Supply and Demand with Subsidy
-(Figure: Supply and Demand with Subsidy) Refer to the figure. With a $2-per-unit subsidy, the price received by sellers is ________ and the price paid by consumers is ________.
A) $3; $2
B) $2; $4
C) $4; $2
D) $3; $4

Question

Use the following to answer questions:
Figure: Supply and Demand with Subsidy 
-(Figure: Supply and Demand with Subsidy) Refer to the figure. With a $2-per-unit subsidy, the price received by sellers is ________ and the price paid by consumers is ________.
A) $3; $2 
B) $2; $4 
C) $4; $2 
D) $3; $4

Quizplus · Accepted Answer

With a $2-per-unit subsidy, the supply curve shifts down by $2 and becomes S1. The equilibrium price decreases to $4, of which $2 is paid by the consumers and $2 is subsidized by the government, and the equilibrium quantity increases to 12 units. Therefore, the price received by sellers is $4, and the price paid by consumers is $2.

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