Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to
S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve
From S to S2 in diagram (b) might be caused by a per-unit
A) subsidy paid to the producers of this product.
B) tax on the producers of this product.
C) subsidy paid to the buyers of this product.
D) tax on the buyers of this product.

Question

Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to
S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve
From S to S2 in diagram (b) might be caused by a per-unit
A) subsidy paid to the producers of this product. 
B) tax on the producers of this product. 
C) subsidy paid to the buyers of this product. 
D) tax on the buyers of this product.

Quizplus · Accepted Answer

A per-unit subsidy paid to the producers of the product would shift the supply curve from S to S2 in diagram (b) to increase the quantity of output to reach the optimal level Q0.

Refer to the Diagrams for Two Separate Product Markets