Which of the Following Statements Is Correct for a Specific

question 15

Multiple Choice

Which of the following statements is correct for a specific good or service?

• A) Whoever pays for a subsidy also pays the entire commodity tax on an item.
• B) Whoever bears the burden of a tax also receives the benefit of the subsidy.
• C) Whoever bears the burden of a tax also bears the cost of the subsidy.
• D) Governments bear the burdens of both taxes and subsidies.

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Definitions:

Marginal Benefit

Marginal Benefit is the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service.

Marginal Cost

The supplementary expense associated with creating an additional unit of a product or service.

Principal-Agent Problem

A scenario in which there is a conflict of interest between a party that delegates work (principal) and the party that performs the work (agent).

Corporations

Legal entities that are separate from their owners, with the ability to own assets, incur liabilities, and engage in contracts or legal actions.