O-LevelEconomicsThe allocation of resources2281/11 · May/June 2011 · Q281 Mark

A government gives farmers a subsidy of $5 per kilo to supply food on the open market where X is the equilibrium position. The effect is illustrated in the diagram below. [Figure] What will be the new equilibrium price and quantity supplied as a result of the subsidy?

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Aequilibrium price ($ per kilo) 10, quantity supplied ('000 kilos) 20

Bequilibrium price ($ per kilo) 13, quantity supplied ('000 kilos) 25

Cequilibrium price ($ per kilo) 15, quantity supplied ('000 kilos) 20

Dequilibrium price ($ per kilo) 20, quantity supplied ('000 kilos) 10

✓ Correct answer

B: equilibrium price ($ per kilo) 13, quantity supplied ('000 kilos) 25

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Topic: The allocation of resources, O-Level Economics (syllabus 2281). Multiple choice, 1 mark.
Source: O-Level Economics, May/June 2011 Paper 1 Variant 1, question 28.

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