The Following Graph Shows the Domestic Supply and Demand Curves

question 74

Multiple Choice

The following graph shows the domestic supply and demand curves for a good. S1 and S2 represent the domestic industry supply before and after the provision of a subsidy by the government respectively, while D represents the domestic demand for the product. Prior to the subsidy, the country was importing 300 units of the good. Refer to the graph to answer the question. Which of the following is true once the subsidy is implemented?

• A) The domestic supply curve shifts and the quantity supplied increases to 300 units.
• B) The world price changes to £8 per unit.
• C) The domestic demand remains unchanged at 400 units.
• D) The quantity of imports increases.

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Definitions:

Roadranger CD-50

A type of heavy-duty transmission lubricant designed for use in Roadranger transmissions, offering protection under high-stress conditions.

API GL-5

A classification of lubricants set by the American Petroleum Institute (API) for gear oils with high-performance properties, used in axles and transmissions.

Synthetic Gear Lube

A lubricant made from chemically engineered materials designed to provide superior protection and performance in vehicle gearboxes.

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A tandem drive axle failure in which one of the four drive wheels loses traction and receives all driveline torque. Spinout conditions may produce wheel speeds four times greater than specified. Spinout failures result from shock loading when a spinning wheel’s motion is suddenly arrested or by lubricant throw-off from rotating components.