Which of the Following Is a Problem of Subsidizing an Industry

question 31

Multiple Choice

Which of the following is a problem of subsidizing an industry to help it establish a world monopoly?

• A) All monopolies create deadweight losses.
• B) A nation may pick the wrong industry to subsidize.
• C) If both the domestic firm and the foreign firm enter the market, nations might end up subsidizing two money losing firms.
• D) Both B and C are correct.

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Definitions:

Pricing

The process of determining the value at which goods or services will be sold, often considering factors such as production costs, market demand, and competition.

Absorption Costing

An accounting method that includes all manufacturing costs - direct labor, materials, and overhead - in the cost of a product.

Long-term Sales

Transactions or sales contracts that are expected to be fulfilled over an extended period of time.

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance premiums, contributing to a company's overhead.