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HELP PLS (1 Viewer)

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peep

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Hey all,

I have my 1st economics exam coming up, and I desperately need help with this question

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Thanks in advance everyone!!
 
J

Jane Mao

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The answer should be C. The tarrif of $2 is a prohibitive tariff so no imports at all. So we need to shift supply curve right until it meets demand at $3. Therefore subsidy amount is the vertical distance between the two line aka 7-3=$4 and it's paying for an amount of 40 000 (since 60000-20000 of original supply ) so total subsidy cost = $160000
 
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