2. Second Blank ____. ($12 /$4 /$16 /$8) 3. Third Blank ____. ($160 /$480 /$320

Question

2. Second Blank ____. ($12 /$4 /$16 /$8)

3. Third Blank ____. ($160 /$480 /$320 /$640)

GIs This Right?? Please Exp Aplia StudentQuestio x MindTap-Cengage Lea -- Y Economics question, plea × , Econ 2.3 Shifting Dema#x > C D courses.aplia.com/af servlet/quiz?quiz action-takeQuiz&quiz-probGuld-QNAPC0A801010000002ae008a0090000;&ctx-malkiatsandhul-0077; Roland - 5. Understanding subsidies Aa Aa In an attempt to protect their domestic film industry from Hollywood's global dominance, the governments of many countries subsidize the production or consumption of domestically made films. Suppose Canada's government gives each of its citizens a subsidy card. The card looks like a credit or debit card; each time these citizens go to seea domestically made film, they swipe their card to get a discount of $8 off the price of a ticket The following graph represents the market for domestically made films in Canada without any subsidy. Adjust the graph to show the effect of the $8 subsidy Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just try again and drag it a little farther PRICE (Dollars) 24 Supply 20 16 12 Demand 10 20 30 40 50 60 QUANTITY (Millions of tickets per year) After the domestic movie subsidy, the price a movie theater receives is and the price paid by consumers IS . This subsidy program costs Canada's government Suggestions Session 58:48 Timeout

Explanation / Answer

The subsidy is $8 per ticket. This decreases the price of ticket that consumer pays, by $8.

So:

1) Price received by movie theater = $12 (equilibrium price), since subsidy is given directly to buyers.

2) Price paid by consumers is $4, since subsidy will decrease the effective price by $8.

3) Cost to government = $8 x (50 - 30) = $160

Reason: At price of $12, quantity = 30. When buyer price falls to $4, demand increases to 50. So cost of subsidy is $8 multiplied by increase in demand.

P.S. The image was visible enough without zooming!

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