When Given a Choice Between a Cash Subsidy and a Voucher

question 42

Multiple Choice

When given a choice between a cash subsidy and a voucher worth the same dollar amount, but only good for the purchase of a single good:

• A)the consumer will always prefer the voucher to the cash subsidy or be indifferent between the two.
• B)the consumer will always prefer the cash subsidy to the voucher or would be indifferent between the two.
• C)the consumer might prefer the cash subsidy to the voucher or might prefer the voucher to the cash subsidy.
• D)the consumer would prefer to receive neither the cash subsidy nor the voucher.

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Definitions:

Principal

The initial amount of money borrowed in a loan or the amount of money invested, not including interest or profits.

Demand Loan

A type of loan where the lender can demand repayment at any time.

Simple Interest Rate

A fixed percentage of the principal amount that is paid as interest for the use of borrowed funds, calculated on an annual basis without compounding.

Final Payment

The last installment paid on a loan, completing the payback of the total borrowed amount and any accrued interest.