When Government Gives a Subsidy to Buyers of Good X

question 42

Multiple Choice

When government gives a subsidy to buyers of good X, the benefits of the subsidy flow to

• A) the buyers of good X only.
• B) the sellers of good X only.
• C) the buyers and sellers of good x equally.
• D) both the buyers and sellers of good x, and the distribution of the benefits will be dependent on the elasticity of demand and the elasticity of supply.

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Definitions:

Expenses

Costs incurred in the process of earning revenue, including operational costs, materials, and services.

FICA

Refers to the Federal Insurance Contributions Act and represents taxes that are deducted to fund Social Security and Medicare programs in the United States.

Federal Income Taxes

Taxes imposed by the government on the annual income of individuals, corporations, trusts, and other legal entities.

State Income Taxes

Taxes levied by individual states on the income of individuals and businesses within their jurisdiction.