If the Government's Provision of a Subsidy Is Too Small

question 48

Multiple Choice

If the government's provision of a subsidy is too small to counteract the entire effect of a positive externality,the:

• A) quantity consumed will still be too low.
• B) quantity consumed will still be too high.
• C) total surplus will be maximized, but the outcome will be inefficient.
• D) total surplus will not be maximized, but the outcome will be efficient.

---

Definitions:

Output

refers to the quantity of goods or services produced by a firm, industry, or economy within a specific period.

Marginal Cost

Marginal cost is the cost of producing one additional unit of a product or service.

Output

The total amount of goods or services produced by a person, machine, business, country, etc., during a given period.

Economic Profit

The net gain or loss after removing both easily identifiable and not readily apparent expenses from the overall turnover.