When Given a Choice Between a Cash Subsidy and a Voucher

question 42

Multiple Choice

When given a choice between a cash subsidy and a voucher worth the same dollar amount, but only good for the purchase of a single good:

• A)the consumer will always prefer the voucher to the cash subsidy or be indifferent between the two.
• B)the consumer will always prefer the cash subsidy to the voucher or would be indifferent between the two.
• C)the consumer might prefer the cash subsidy to the voucher or might prefer the voucher to the cash subsidy.
• D)the consumer would prefer to receive neither the cash subsidy nor the voucher.

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Definitions:

Cost of Equity Capital

This refers to the return that investors require on their equity investment in a company, effectively the cost for a company to maintain equity financing.

Future Growth Opportunities

Potential avenues or prospects that can lead to an expansion of a business's operations and an increase in its profitability.

Cost of Equity Capital

The return that investors require for an investment in a company's equity, reflecting the compensation for taking on equity risk.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.