When Taxes or Subsidies on a Particular Product Are Introduced

question 40

Multiple Choice

When taxes or subsidies on a particular product are introduced into the general equilibrium model we can be sure that

• A)Taxes make the taxed product appear too expensive to its producer
• B)Subsidies make the product appear too cheap to its producer
• C)We get too much of the subsidized product and too little of the taxed product
• D)A more fair allocation of resources is possible

---

Definitions:

Histamines

Compounds involved in local immune responses as well as regulating physiological function in the gut and acting as neurotransmitters.

Receptor Sites

Specific regions on the surface of a cell or within a cell to which specific molecules, such as hormones or neurotransmitters, can bind.

Morphine

A potent opiate analgesic drug derived from opium used to relieve severe pain.

Endorphins

Naturally occurring chemicals in the brain that reduce pain and boost pleasure, resulting in feelings of well-being.