Suppose the supply of apples is given by and the demand for apples is given by . Suppose the government institutes a subsidy of per unit of apples sold. Calculate , the equilibrium quantity of apples sold after the subsidy is imposed and , the tax revenue needed to pay for the subsidy.
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Suppose the supply of apples is given by S = (10 + 4P) and the demand for apples is given by D = (100 - 6P). Suppose the government institutes a subsidy of t = $3 per unit of apples sold. Calculate Q, the equilibrium quantity of apples sold after the subsidy is imposed and R, the tax revenue needed to pay for the subsidy. (A) Q = 46, R = 138 (B) Q = 50, R = 150 (C) Q = 53· 2, R = 159· 6 (D) None of the above
Perfect competition has come up 115 times in 7 exams since 2006.
This question is on Price ceilings, floors and subsidies, part of Perfect competition in Microeconomics.
What binding and non-binding price controls and per-unit subsidies do to quantity, shortage and cost.
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Question from the JNU SIS 2015 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.