If Instead of a Per-Unit Subsidy, the Government Offered to Pay

question 34

Multiple Choice

If instead of a per-unit subsidy, the government offered to pay for half the good's price, no matter the price:

• A) the wedge method would no longer work.
• B) instead of a parallel shift in demand, the subsidy should be modeled as a demand curve that is twice as steep.
• C) demand would be perfectly elastic.
• D) there would be no change in how we model the subsidy.

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Definitions:

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