An Economic Problem with Using Subsidies or Price Ceilings to Move

question 16

Multiple Choice

An economic problem with using subsidies or price ceilings to move a monopoly toward the competitive equilibrium is that

• A) it may increase monopoly profits.
• B) it may decrease monopoly profits.
• C) policy makers may not be able to determine what the competitive equilibrium is.
• D) policy makers always need to be lobbied before taking any actions.

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Definitions:

Economy

The large set of inter-related production, consumption, and exchange activities that aid in determining how scarce resources are allocated.

Marginal

Refers to the change or difference in an economic variable when altering another variable by a small or marginal amount.

Welfare Dependency

A situation where individuals or families continually rely on government welfare programs for their income over long periods, rather than seeking employment.

Billionaires

Individuals whose net worth or wealth is equal to or exceeds one billion units of a currency.