The Difference Between a Tax and a Subsidy Is That

question 17

Multiple Choice

The difference between a tax and a subsidy is that when the government places a tax on a good,it ________ the equilibrium price and ________ the equilibrium quantity,whereas when the government places a subsidy on a good,it ________ the equilibrium price and ________ the equilibrium quantity.

• A) increases; decreases; decreases; increases
• B) increases; increases; decreases; decreases
• C) decreases; decreases; increases; increases
• D) decreases; increases; increases; decreases
• E) increases; does not change; does not change; increases

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Definitions:

Production Of Pork

The process involved in breeding, raising, and slaughtering pigs for the purpose of obtaining pork products.

Elastic Supply

A situation where the quantity supplied of a good or service changes significantly in response to changes in its price.

Time Period

A specific duration or span of time during which certain events or processes occur or are evaluated.

Elasticity Of Supply

An assessment of the extent to which the supply of a product varies following a price alteration.