The Value of a Price-Distorting Subsidy for a Three-Bedroom Apartment

question 34

Multiple Choice

The value of a price-distorting subsidy for a three-bedroom apartment is $100 per month.This means that the person choosing to live in an apartment of that size would have to pay an extra $100 per month at the market rent.Then it follows that:

• A)that person would be worse off if she received a cash subsidy of $100 per month.
• B)that person would be better off if she received a cash subsidy of $100 per month.
• C)that person would be just as well off if she received a cash subsidy of less than $100 per month.
• D)Both (b) and (c) are correct.

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts.

Ledger Accounts

Individual records providing detailed information about all the transactions related to a specific account, kept in the ledger of a company.