Suppose a Small Island Nation Imports Sugar for Its Population

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, then relative to before the subsidy, total economic surplus will ______ by ______ per day.

A) increase; $6,500
B) decrease; $6,500
C) increase; $1,000
D) decrease; $1,000