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What is the price per unit that producers receive after the subsidy?
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Answer
\mathbf{\4}$
Step-by-step solution
3 stepsIdentify the new equilibrium after the subsidy.
The original supply curve is S, and the demand curve is D. The subsidy shifts the supply curve to S1. The new equilibrium is the intersection of S1 and D.
From the diagram, the new equilibrium occurs at a quantity of 8 (000 tons) and a price of $2.Determine the price consumers pay and the total subsidy per unit.
At the new equilibrium, consumers pay a price of 4. At a quantity of 8 (000 tons), the price on the new supply curve S1 is
2. The subsidy per unit is the difference between these two prices: $$ \text{Subsidy per unit} = \4 - $2 = $2 $$Calculate the price producers receive.
Producers receive the price paid by consumers plus the per-unit subsidy.
The price per unit that producers receive after the subsidy is
\boxed{\mathbf{\4}}$.
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