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Figure: Supply and Demand with Subsidy
-(Figure: Supply and Demand with Subsidy) Refer to the figure. The deadweight loss from a $2 subsidy is:
A) $100.
B) $800.
C) $50.
D) $400.

Question

Use the following to answer questions:
Figure: Supply and Demand with Subsidy 
-(Figure: Supply and Demand with Subsidy) Refer to the figure. The deadweight loss from a $2 subsidy is:
A) $100. 
B) $800. 
C) $50. 
D) $400.

Quizplus · Accepted Answer

The deadweight loss is the area of the triangle formed by the equilibrium price without the subsidy and the equilibrium price with the subsidy. The base of the triangle is $20 and the height is $4, so the area is $40.

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