30) Suppose a small island nation imports sugar for its population at the world price of$1,500 per ton. The domestic market for sugar is shown below.250020001500S = World priceDomestic pricewith subsidy100050048.121620Quantity (tons/day)If the government provides a subsidy of $500 per ton, then relative to before thesubsidy, total economic surplus willA) increase; $1,000C) decrease; $6,500byB) decrease; $1,000D) increase; $6,500per day.Price ($/ton)

Economic surplus is the consumer surplus and producer surplus. Consumer surplus is the area above…

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. 2500 2000 1500 S = World price Domestic price with subsidy 1000 Price ($/ton)

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. 2500 2000 1500 S = World price Domestic price with subsidy 1000 Price ($/ton)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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30) Suppose a small island nation imports sugar for its population at the world price of
$1,500 per ton. The domestic market for sugar is shown below.
2500
2000
1500
S = World price
Domestic price
with subsidy
1000
500
4
8.
12
16
20
Quantity (tons/day)
If the government provides a subsidy of $500 per ton, then relative to before the
subsidy, total economic surplus will
A) increase; $1,000
C) decrease; $6,500
by
B) decrease; $1,000
D) increase; $6,500
per day.
Price ($/ton)

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