Subsidies Are Most Likely To

question 29

Multiple Choice

Subsidies are most likely to:

• A)reduce consumer surplus.
• B)increase total economic surplus.
• C)reduce total economic surplus.
• D)leave total economic surplus unchanged, but transfer surplus from producers to consumers.

---

Definitions:

Monopolistic Competition

A market structure characterized by many sellers offering differentiated products or services, allowing for some degree of market power and price control.

Economic Profits

Profits earned by a firm after accounting for both explicit and implicit costs.

Monopolistically Competitive

A market structure characterized by many firms selling products that are similar but not identical, allowing for limited control over market prices.

Short-run Equilibrium

A state in which supply and demand are balanced at a given price level within a short time frame, before all factors become variable.