Figure 99 Shows the Demand and Supply of a Product in in a Competitive

question 95

Multiple Choice

Figure 9.9 shows the demand and supply of a product in a competitive market.

-Refer to Figure 9.9 to answer the question.Suppose that this graph represents an industry with big external benefits and that the government wishes to increase its output by 10 units and raise its price.Which of the following will produce this result?

• A)Imposing an excise tax of $2.
• B)Imposing an excise tax of $1.
• C)Granting a subsidy of $2 to producers.
• D)Granting a subsidy of $1 to producers.
• E)Granting a subsidy of $2 to consumers.