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

question 185

Multiple Choice

When a government subsidy is granted to the sellers of a product, buyers 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:

Linear Relationship

describes a direct proportionality between two variables, meaning as one variable increases or decreases, the other does so in a constant rate.

Interval Variables

Variables measured along a scale in which each point is placed at an exact distance from each other, like temperature in Celsius.

Standard Deviation

A statistic that measures the dispersion of a dataset relative to its mean, indicating how spread out the data points are.

Coefficient of Correlation

A statistical measure that calculates the strength and direction of a linear relationship between two variables.