Suppose Ethanol Is Produced in a Perfectly Competitive Market

question 4

Multiple Choice

Suppose ethanol is produced in a perfectly competitive market.If a subsidy is paid to ethanol producers,the ethanol producers' profit will ________.

• A) increase in the short run but reduce to zero in the long run
• B) increase in the short run and in the long run
• C) increase in the short run but become negative in the long run
• D) decrease in the short run but reduce to zero in the long run

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Definitions:

Implicit Understanding

An understanding that is not directly expressed but is assumed or inferred from actions, words, or context.

Material Goods

Physical items that are produced and can be bought, sold, or traded.

Superiority

The state of being superior or higher in quality, rank, or importance.

Societal Norm

The accepted behaviors, values, and standards within a society or community that are considered normal or typical.