When a Government Subsidy Is Granted to the Buyers of a Product

question 178

Multiple Choice

When a government subsidy is granted to the buyers of a product, sellers can end up capturing some of the benefit because

• A) the market price of the product will fall in response to the subsidy.
• B) the market price of the product will rise in response to the subsidy.
• C) the market price of the product will not change in response to the subsidy.
• D) producers will reduce the supply of the product.

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Definitions:

Financial Records

Documents that capture all financial transactions of a business or individual, including income, expenses, assets, and liabilities.

Accounts Receivable Turnover

A financial ratio that measures how effectively a company collects cash from credit sales by comparing net credit sales with the average balance of accounts receivable.

Fiscal Years

A one-year period that companies and governments use for financial reporting and budgeting, differing from the calendar year.

Maturity Value

The amount payable to an investor at the maturity date of a financial instrument, typically the principal plus any final interest payments.