Figure: Demand and Supply with Subsidy (Figure: Supply and Demand

question 75

Multiple Choice

Figure: Demand and Supply with Subsidy (Figure: Supply and Demand with Subsidy) Refer to the figure.What is the deadweight loss caused by the subsidy?

• A)$100
• B)$200
• C)$3,200
• D)$800

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Definitions:

Labor Market

The input/factor market in which households supply work for wages to firms that demand labor.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to substitute cheaper goods for more expensive ones.

Wage Decrease

A reduction in the pay rate of a worker or a group of workers.

Labor Supply

The total hours that workers are willing and available to work at a given wage rate, within a specific labor market.