Suppose Australia\'s government gives each of its citizens a subsidy card. Each

Question

Suppose Australia's government gives each of its citizens a subsidy card.  Each time these citizens go to see a domestically made film, they swipe their card to get a $4 discount off of the price of a ticket.

Before the subsidy, the price of a movie ticket is $6, and the quantity is 15 million tickets per year.

After the domestic movie subsidy, the price a movie theater receives is ______, and the price paid by customers is ______.  The subsidy program costs Australia's government ________.

This graph represents the market for domestically made films in Australia without any subsidy.

I believe the graph representing the subsidy would look like this:

Which would put the answers to my question as followed:

After the domestic movie subsidy, the price a movie theater receives is __$6__, and the price paid by customers is __$2__.  The subsidy program costs Australia's government ___$60 million___.

However when I go to answer my question the options given to me for Austrailia's subsidy cost is:

$40 million

$80 million

$120 million

$160 million

Would somebody please help me with this question, and explain the answer?

Suppose Australia's government gives each of its citizens a subsidy card. Each time these citizens go to see a domestically made film, they swipe their card to get a $4 discount off of the price of a ticket. Before the subsidy, the price of a movie ticket is $6, and the quantity is 15 million tickets per year. After the domestic movie subsidy, the price a movie theater receives is ______, and the price paid by customers is ______. The subsidy program costs Australia's government ________.

Explanation / Answer

To actually describe it would to say that the demand for movie tickets would increase due to the subsidy, but the price of the movie tickets would increase also. However the supply of movie tickets wouldn't change, because subsidies paid to buyers benefits both sides of the market. The movie goers will pay less, and the theaters will make more.

Since the price of a ticket would increase to $8, the buyer gets a $4 subsidy which brings their price down to $4 ($8 - $4 = $4). Also, the subsidy would increase the amount of moviegoers to 20 million. Therefore 20 million times $4 per person equals $80 million that the government would pay.

So, in plain format:

The demand for the movie tickets would increase to $8 per ticket, the price paid by customers would be $4 a ticket, and it would cost the country $80 million.

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