Gce Model Questions Vol1 2019 Economics Question 38

Practice objective / multiple choice question 38 from the 2019 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2019 Economics Objective / Multiple Choice Hard Difficulty
Question 38 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • objective

A small open economy produces good X. Domestic supply is \(Q_s = 20 + 3P\) and domestic demand is \(Q_d = 40 - P\), where \(P\) is the price in dollars. The world price without any intervention is \(P_w = \$10\). The government introduces an export subsidy of \(s = \$2\) per unit. Assuming the world price remains \(\$10\), determine (a) the new domestic price received by producers, (b) the quantity exported after the subsidy, (c) the total government outlay, and (d) the net change in national welfare (sum of changes in consumer surplus, producer surplus and government cost).

Answer Options

Correct Answer A. (a) \(\$12\); (b) 26 units; (c) \(\$52\); (d) net welfare gain of \(\$54\).
B. (a) \\(\\$12\\); (b) 30 units; (c) \\(\\$60\\); (d) net welfare gain of \\(\\$30\\).
C. (a) \\(\\$11\\); (b) 24 units; (c) \\(\\$48\\); (d) net welfare gain of \\(\\$40\\).
D. (a) \\(\\$13\\); (b) 28 units; (c) \\(\\$56\\); (d) net welfare loss of \\(\\$10\\).
Correct Answer
A
Correct Option:
(a) \(\$12\); (b) 26 units; (c) \(\$52\); (d) net welfare gain of \(\$54\).

About This Question

This is Gce Model Questions Vol1 2019 Economics Question 38. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Economics examination.

Difficulty level: Hard .

View More Gce Model Questions Vol1 2019 Economics Questions More Gce Model Questions Vol1 Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows
Chat with Support