Suppose a Small Island Nation Imports Sugar for Its Population

question 142

Multiple Choice

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. If the government provides a subsidy of $500 per ton, the equilibrium price of sugar will be ________ per ton, and the equilibrium quantity will be ________ tons per day.

• A)$1,000; 12
• B)$1,000; 8
• C)$1,500; 12
• D)$1,500; 8

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Definitions:

Lagrange Multiplier

A technique used in constrained optimization problems to find the maximum or minimum of a function subject to constraints.

Lambda

A symbol commonly used in mathematics and physics to represent wavelengths, eigenvalues, and decay constants, among other concepts.

Lagrange Multipliers

A strategy used in mathematical optimization to find the local maxima and minima of a function subject to equality constraints.

Constrained Optimization

The process of finding the maximum or minimum value of a function subject to certain constraints, common in economics to find the optimal resource allocation.