The Following Questions Refer to the Accompanying Diagram Shows the Effects

question 35

Multiple Choice

The following questions refer to the accompanying diagram shows the effects of an excise subsidy given to firms. The initial price and quantity are P0 and Q0, respectively. After the subsidy is granted, the equilibrium quantity is Q1, firms receive the price Ps, and consumers pay the price Pd.

-Refer to Excise Subsidy.The deadweight loss created by the subsidy is represented by

• A) area F + G.
• B) area D + G + J.
• C) area C.
• D) area D.

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Definitions:

Above Average Profits

Earnings that exceed the norm for a particular industry or sector, often resulting from competitive advantages or efficient operations.

Controls Small Share

The act of managing or influencing a minor portion of the market or resources.

One Seller

Indicates a market structure known as a monopoly, where a single company or entity controls the entire supply of a product or service, facing no competition.

Few Substitutes

Describes a market condition where there are limited alternative products or services, often leading to higher prices and less competition.