The Demand and Supply of Pickles Are Given by Q^D

question 40

Multiple Choice

The demand and supply of pickles are given by Q^D = 300 - 500P and Q^S = 400P - 150, where P is the price per pickle and Q measures the quantity of pickles in millions. Suppose the government creates a subsidy of $0.25 per pickle. Which of the following statements are TRUE?
I. Without the subsidy, the equilibrium quantity of pickles is 75 million.
II. With the subsidy, consumers pay 38.9 cents per pickle.
III. With the subsidy, producers receive 75 cents per pickle.
IV. With the subsidy, the equilibrium quantity of pickles is greater than 100 million.

• A) II, III, and IV
• B) I and III
• C) II and IV
• D) I, III, and IV

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Definitions:

Interest Rate Sensitivity

A measure of how the price of a financial asset changes in response to changes in interest rates.

Double Digit Yields

Interest or dividend rates that are in the double digits percentage-wise, indicating high returns on investment but typically with higher risk.

Single Digit Returns

Single digit returns refer to the percentage gain or loss on an investment that is less than ten percent, indicating a low to moderate performance.

Liquidity

The ability of an asset to be quickly converted into cash without significantly affecting its price.