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Subsidy Question HELP (1 Viewer)
- Thread starter rezzeraa
- Start date
.kumori
Well-Known Member
I'm pretty sure its (C)
(1) At S1 (where the subsidy is applied), at the world price of $3, domestic producers are able to produce 60,000 units.
(2) When a quota is applied of 40,000, it shifts supply left at S (decrease of supply), meaning now that domestic producers are restricted in only able to produce 40,000 units.
The question is asking the change between (1) and (2) regarding domestic production (aka quantity produced), so the difference is 60,000-40,000= 20,000 units
Therefore, there is a (C) Decrease in domestic production by 20, 000
(1) At S1 (where the subsidy is applied), at the world price of $3, domestic producers are able to produce 60,000 units.
(2) When a quota is applied of 40,000, it shifts supply left at S (decrease of supply), meaning now that domestic producers are restricted in only able to produce 40,000 units.
The question is asking the change between (1) and (2) regarding domestic production (aka quantity produced), so the difference is 60,000-40,000= 20,000 units
Therefore, there is a (C) Decrease in domestic production by 20, 000