A Subsidy

question 132

Multiple Choice

A subsidy:

• A) All of these statements are true.
• B) is a requirement that the government pay an extra amount to producers or consumers of a good.
• C) is used by governments to encourage the production and consumption of a particular good or service.
• D) is used by governments as an alternative to price controls to benefit certain groups without generating a shortage or a surplus.

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Definitions:

Profit-Maximizing Output

The level of production at which a firm achieves the highest possible profit, determined by the point where marginal revenue equals marginal cost.

Minimum Level

The Minimum Level refers to the least amount, extent, or degree that is acceptable or achievable in a specific context.

Marginal Cost

The financial requirement for producing a supplementary unit of a product.

Average Total Cost

The total cost divided by the quantity of output produced, representing the average cost per unit of output.