Relative to the unregulated market outcome, what is the change in producer surplus brought about the $3 subsidy per unit?

Question

Relative to the unregulated market outcome, what is the change in producer surplus brought about the $3 subsidy per unit?

BlackTom AI · Accepted Answer

We need to examine how a per-unit subsidy affects producer surplus (PS) relative to the unregulated outcome.

First, recall the key relationship: the change in producer surplus from a per-unit subsidy equals the subsidy amount times the change in the quantity produced (ΔQ). In symbols, ΔPS = s × ΔQ, where s is the subsidy per unit.

Option-by-option analysis:
- Option "$4.5.": This would imply ΔPS = 4.5, which is not consistent with the standard rectangle-area calculation for a per-unit subsidy unless ΔQ and s are arranged to yield 4.5. Given s = 3, this would require ΔQ = 1.5 units. Without evidence that the quantity changes by 1.5 units, this is unlikely in the typical discrete-quantity context.
- Option "-$9." (negative $9): A subsidy pays producers more, so producer surplus should not decrease as a result of the subsidy. Therefore a negative change contradicts the direction of the subsidy’s effect on PS.
- Option "$9.": With a subsidy of s = 3 per unit, a common outcome is that the quantity produced increases by 3 units (ΔQ = 3) relative to the unregulated outcome. The increase in PS is then ΔPS = s × ΔQ = 3 × 3 = 9. This matches the standard area of a rectangle representing the subsidy gain on the PS curve.
- Option "$6.": This would correspond to ΔQ = 2 units (since 3 × 2 = 6). If the quantity rise were only 2 units in the given scenario, this could be correct, but typical problems with a $3 subsidy and the stated change in PS aim for a whole-number multiple that aligns with a 3-unit quantity increase, yielding $9 rather than $6.

In short, the subsidy per unit directly scales the gain in producer surplus by how much the quantity produced increases. If ΔQ is 3 units under a $3 per-unit subsidy, the change in PS is 3 × 3 = 9. The other options either misstate the direction (negative), rely on an unlikely ΔQ value, or provide an inconsistent product of s and ΔQ given the common setup of this problem.

Relative to the unregulated market outcome, what is the change in producer surplus brought about the $3 subsidy per unit?

View Explanation

Log in for full answers

Similar Questions

Producer surplus is the amount a seller is paid minus the cost of production.

Producer surplus measures the

24. The producer surplus increases whenever the price increases

Use the figure below to answer the following question. What area represents producer surplus after the government imposes the excise tax on the market?

Producer surplus

Part 1In the figure, when production is 3 units with a price of $3, the producer surplus in this market equals A. b + g. B. a + b + f + g + h + i. C. f + g. D. a + b + f + g.

MC Qu. 20 Use the table below to answer... Use the table below to answer the following question. Units Market Price Minimum Acceptable Price 1 $10 $2 2 10 4 3 10 6 4 10 8 5 10 10 6 10 14 What is the value of producer surplus in the table above?

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

Relative to the unregulated market outcome, what is the change in producer surplus brought about the $3 subsidy per unit?

View Explanation

Log in for full answers

Similar Questions

Producer surplus is the amount a seller is paid minus the cost of production.

Producer surplus measures the

24. The producer surplus increases whenever the price increases

Use the figure below to answer the following question. What area represents producer surplus after the government imposes the excise tax on the market?

Producer surplus

Part 1In the​ figure, when production is 3 units with a price of​ $3, the producer surplus in this market equals A. b​ + g. B. a​ + b​ + f​ + g​ + h​ + i. C. f​ + g. D. a​ + b​ + f​ + g.

MC Qu. 20 Use the table below to answer... Use the table below to answer the following question. Units Market Price Minimum Acceptable Price 1 $10 $2 2 10 4 3 10 6 4 10 8 5 10 10 6 10 14 What is the value of producer surplus in the table above?

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Part 1In the figure, when production is 3 units with a price of $3, the producer surplus in this market equals A. b + g. B. a + b + f + g + h + i. C. f + g. D. a + b + f + g.