Unlike an Equivalent-Sized Cash Transfer,an Excise Subsidy on Good X

question 61

Multiple Choice

Unlike an equivalent-sized cash transfer,an excise subsidy on good X:

• A)has an income effect.
• B)leaves the consumer better off.
• C)has a substitution effect.
• D)increases consumption of composite goods.

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Definitions:

Fixed Costs

Costs that do not change in total amount with a change in business activity level, such as rent or salaries.

Short Run

The short run in economics is a period during which at least one input, like plant size, is fixed and cannot be changed.

Monopolistically Competitive

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and price setting.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent or salaries.