What Do Subsidies and Commodity Taxes Have in Common

question 2

Multiple Choice

What do subsidies and commodity taxes have in common?

• A) In both cases, who the policy mainly affects depends on who is assigned the tax or subsidy.
• B) Both policies create inefficient increases in trade.
• C) Both policies have a greater impact on the side of the market with the more inelastic curve.
• D) Both policies decrease deadweight loss.

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Definitions:

Monopoly Power

The ability of a company or entity to control or dominate an industry or sector, often to the point where competition is significantly reduced or eliminated.

Federal Antitrust Laws

Laws enacted by the federal government of the United States to eliminate or prevent anti-competitive practices, ensure fair competition, and protect consumers from monopolies and cartels.

International Commerce

The exchange of goods and services between countries around the world.

Horizontal Price-fixing

An illegal agreement between competitors to set prices at a certain level, rather than allowing them to be determined by market forces.