The Graph Shown Portrays a Subsidy to Buyers

question 55

Multiple Choice

The graph shown portrays a subsidy to buyers. Why might the government enact such a policy?

• A) To encourage consumption
• B) To encourage consumers to substitute
• C) To discourage production
• D) To discourage consumption

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Definitions:

TC

Total Costs, the sum of all costs incurred in the production of goods or services.

TR

Total Revenue; the total receipts from sales of goods or services provided by a company before any deductions are made.

TVC

Total Variable Cost; the total of all costs that vary with the level of output produced by a company.

Economic Loss

A monetary reduction in income, net worth, or value of assets beyond normal expectations, often as a result of business activities or economic policies.