Subsidy reduces consumer price, altering total spending as P_c × Q_new

Steps:

• Original equilibrium: supply S intersects demand D at price $15 and quantity 10 units (consumer spending$150).
• Subsidy shifts supply to S' (rightward by subsidy amount, e.g., $3/unit), lowering effective supply cost.
• New equilibrium: S' intersects D at consumer price $12 and quantity 10 units.
• Total consumer spending: $12 × 10 =$120.

Why B is correct:

• Consumer spending is the rectangle of post-subsidy price ($12) times new quantity (10), per standard supply-demand model.

Why the others are wrong:

• A: Underestimates spending; ignores quantity stability post-subsidy.
• C: Overestimates; confuses consumer price with producer price including subsidy.
• D: Too high; reflects pre-subsidy spending or total market value.

Final answer: B