The supply curve was shifted to the right because a subsidy was paid to the domestic producers. This allows them to sell towels at lower price at $8 per towel. Therefore, a subsidy of $2 must be paid if the equilibrium price is $10. The question is asking "PER TOWEL" - you're unlikely to be asked to do much more.Christopher, Is there any reason you say that, despite the working posted above?
Also, this means the size of the subsidy is the vertical distance as they are paid $2 to lower their price.