Consider a Perfectly Competitive Market with Inverse Market Supply

question 35

Multiple Choice

Consider a perfectly competitive market with inverse market supply and inverse market demand Suppose the government subsidizes this market with a subsidy of $5 per unit.What is the deadweight loss resulting from the subsidy?

• A) 0, subsidies do not have a deadweight loss
• B) 2.5
• C) 5
• D) 7.5

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Definitions:

Reward to Variability Ratio

A financial metric used to assess the return of an investment relative to its risk.

Probability Distribution

A statistical function that describes the likelihood of occurrence of different possible outcomes for an experiment.

Expected Rates of Return

The projected rate of earnings from an investment, based on the potential outcomes and their probabilities, mirroring the concept of expected return with emphasis on various investments.

Stocks A and B

Generally refers to different classes of stocks a company might offer, with each class having distinct rights, privileges, or voting powers.