How Does a Per-Unit Subsidy Affect the Simple Monopoly Equilibrium

question 75

Multiple Choice

How does a per-unit subsidy affect the simple monopoly equilibrium?

• A) The subsidy does not affect marginal cost and thus does not affect the monopoly equilibrium.
• B) The subsidy lowers the price charged by the monopoly,but it also lowers social gain.
• C) The subsidy increases the monopoly's profit but does not improve social gain.
• D) The subsidy causes both monopoly output and social gain to increase.

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