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.

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Definitions:

Sunk Costs

Sunk costs are expenditures that have already been incurred and cannot be recovered, and should not affect future investment decisions or operations.

Opportunity Costs

The forfeit of discarding the next top choice during the decision-making procedure.

Scarce Resources

Resources that are limited in availability and cannot satisfy all the various uses for them, leading to competition and the need for allocation.

Production Possibility Frontier

The Production Possibility Frontier (PPF) is a graphical representation that shows the maximum quantity of two goods or services that a society can produce, given fixed resources and technology, highlighting the trade-offs in production choices.