Use the Figure Below to Answer the Following Question(s)

question 30

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 4-12

Refer to Figure 4-12. The supply curve S and the demand curve D ₁ indicate initial conditions in the market for college textbooks. A new government program is implemented that grants students a $30 per textbook subsidy on every textbook they purchase, shifting the demand curve from D ₁ to D ₂. Which of the following is true for this subsidy given the information provided in the exhibit?

• A) The original average selling price of textbooks was $100, and after the subsidy it rises to $120.
• B) $90 represents the net price a buyer must pay for a textbook after taking into account the subsidy payment.
• C) Textbook buyers will receive an actual benefit of $10 from the subsidy, while textbook sellers will receive an actual benefit of $20 from the subsidy.
• D) All of the above are true.

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Definitions:

Debt Securities

Financial instruments representing a loan made by an investor to a borrower, typically involving periodic interest payments and the return of principal at maturity.

Held-to-maturity Securities

These are financial assets that a company has the intent and ability to hold until they mature.

Amortized Cost

The expense of an intangible asset over its useful life.

Investee

An entity in which an investor holds an interest, often evidenced by ownership of shares or securities.