A Subsidy to Firms Intended to Reduce Pollution in an Industry

question 87

Multiple Choice

A subsidy to firms intended to reduce pollution in an industry would

• A)shift the LRAC curve upward.
• B)have the same impact on the firm as a tax.
• C)likely drive some existing firms from the industry.
• D)likely have the paradoxical effect of increasing pollution in the industry in the long run.

---

Definitions:

Creative Destruction

A concept in economics introduced by Joseph Schumpeter, referring to the process where outdated or obsolete products, services, and technologies are replaced by innovative and more efficient ones, driving economic progress.

Destroyed Industries

Sectors or markets that have suffered severe disruption or collapse, often due to technological changes, market shifts, or external disruptions.

Purely Competitive Industries

Industries in which numerous small firms compete against each other, selling identical or very similar products, and where no single firm can influence market prices.

Innovate

The process of creating new ideas, products, or methods, often resulting in improved efficiency, effectiveness, or competitive advantage.