Assume a subsidy to buyers has been enacted in the market in the graph shown. With the subsidy, the producers sell _____ units and receive _____ for each of them.

Question

Quizplus · Accepted Answer

With a subsidy to buyers, the demand curve shifts upward by the amount of the subsidy, which is $10 in this case. As a result, the equilibrium quantity increases from 100 to 150 units, and the equilibrium price received by producers increases from $20 to $40 (which is the new intersection point of the shifted demand curve with the original supply curve). Therefore, the correct answer is C, where the producers sell 150 units ($40 each) with the subsidy.

Assume a Subsidy to Buyers Has Been Enacted in the Market