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Question at position 15 The graph above shows the demand and supply of a good with a subsidy paid to suppliers. Match the concepts with the areas.Prompt 1Increase in Producer Surplus from SubsidyAnswer for prompt 1 Increase in Producer Surplus from Subsidy[input]Prompt 2Increase in Consumer Surplus from SubsidyAnswer for prompt 2 Increase in Consumer Surplus from Subsidy[input]Prompt 3Deadweight Loss from SubsidyAnswer for prompt 3 Deadweight Loss from Subsidy[input]Possible answersArea A plus Area BArea E Plus Area FArea FArea C plus Area D plus Area EArea AArea B
Options
A.Area A plus Area B
B.Area E Plus Area F
C.Area F
D.Area C plus Area D plus Area E
E.Area A
F.Area B
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Step-by-Step Analysis
First, I will restate what the prompt and options are asking and identify the three prompts we must answer.
- Prompt 1 asks: Increase in Producer Surplus from Subsidy. Which named area in the diagram corresponds to this increase?
- Prompt 2 asks: Increase in Consumer Surplus from Subsidy. Which named area corresponds to this increase?
- Prompt 3 asks: Deadweight Loss from Subsidy. Which named area corresponds to this loss?
Answer options (common to all prompts):
- Area A plus Area B
- Area E Plus Area F
- Area F
- Area C plus Area D plus Area E
- Area A
- Area B
Now we evaluate each prompt option by option, explaining why each choice would or would not fit, before stating the chosen area for that prompt.
Prompt 1: Increase in Producer Surplus from Subsidy
- Option Area A plus Area B: This would imply a combined gain that includes two distinct regions. If the subsidy is paid to suppliers, producer surplus typically increases by a subset of the shaded area within the supply-shift effect, not necessarily both A and B unless both are part of the PS gain. Without seeing th......Login to view full explanationLog in for full answers
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