If a Subsidy Is Granted to Perfectly Competitive Firms That

question 13

Multiple Choice

If a subsidy is granted to perfectly competitive firms that provide external benefits to society, the firm's ________ curve will shift down and the industry ________ curve will shift to the right.

• A) marginal cost; demand
• B) marginal cost; supply
• C) marginal benefit; demand
• D) marginal benefit; supply

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Definitions:

Perfect Competition

A market structure characterized by an infinite number of buyers and sellers, homogeneous products, no barriers to entry or exit, perfect information, and no individual buyer or seller having any influence on the market price.

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be used simultaneously by more than one person without reducing its availability to others.

Hardwood Forest

Forests predominantly made up of deciduous trees that lose their leaves annually, known for their dense, high-quality wood.

Non-excludable

A property of a good or service that makes it impossible, or highly impractical, to prevent individuals from using the good or service once it is provided.