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Figure: Demand and Supply with Subsidy
-(Figure: Supply and Demand with Subsidy) Refer to the figure. Suppose a subsidy allows sellers to receive their product at the price of $8 with a quantity of 400 units. What is the dollar amount of the subsidy per unit of the good?
A) $1
B) $6
C) $2
D) $100

Question

Use the following to answer questions:
Figure: Demand and Supply with Subsidy 
-(Figure: Supply and Demand with Subsidy) Refer to the figure. Suppose a subsidy allows sellers to receive their product at the price of $8 with a quantity of 400 units. What is the dollar amount of the subsidy per unit of the good?
A) $1 
B) $6 
C) $2 
D) $100

Quizplus · Accepted Answer

The equilibrium price before the subsidy is $10. With the subsidy, sellers can receive the product at $8, so the government is paying $2 per unit to the sellers.

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