A Subsidy Is Sometimes Used by the Government to Correct

question 162

Multiple Choice

A subsidy is sometimes used by the government to correct the problems associated with

• A) negative externalities.
• B) positive externalities.
• C) public goods.
• D) monopolies.

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Definitions:

Risk Averse

The preference to avoid uncertainty, expressing a behavior where individuals prefer known risks over unknown outcomes.

Financial Investment

Allocating money into an asset or a project with the expectation of generating income or profit.

Government Bond

A type of investment where an investor loans money to a government in exchange for periodic interest payments plus the return of the bond's face value at maturity.

Moral Hazard

The situation where one party in a transaction has the opportunity to take risks because they know the other party will bear the costs.