A certain kingdom features a competitive market for rye bread. The inverse demand for rye bread is p = 10–(q/10) and the supply function is q = 10 + 5p, where p is the price in dollars and q is loaves of bread. The king made it illegal to sell rye bread for a price above 5 dollars per loaf. To avoid shortages, he agreed to pay bakers enough of a subsidy for each loaf of bread so as to make supply equal demand.
How much would the subsidy per loaf have to be?
(a). 8 dollars
(b). 4 dollars
(c). 10 dollars
(d). 5 dollars
(e). 3 dollars

Answer rating: 100% (QA)

Price fixed for rye bread 5 per loaf Calculate the quantity demanded at 5 per lo... View the full answer