Does a Subsidy to Sellers Affect the Supply Curve

question 137

Multiple Choice

Does a subsidy to sellers affect the supply curve?

• A) Yes; the supply curve shifts down by the amount of the subsidy.
• B) Yes; the supply curve shifts to the right by the amount of the subsidy.
• C) No; the supply curve does not move, as quantity supplied increases instead.
• D) No; the supply curve does not move, as quantity supplied decreases instead.

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Definitions:

Government Subsidy

refers to financial support provided by the government to businesses, individuals, or other governmental entities to encourage or support certain activities or reduce their costs.

Welfare Payments

Government-provided financial assistance to individuals or households, typically aimed at supporting those who are unemployed, disabled, or on a low income.

Efficiency Loss

The reduction in economic welfare or efficiency that occurs when a market does not allocate resources optimally, often due to externalities or market power.

Demand Curves

A visual depiction showing how the price of a product relates to the amount people want to buy.