A Subsidy Can Actually Cause the Consumption of Subsidized Goods

question 37

Multiple Choice

A subsidy can actually cause the consumption of subsidized goods to fall if:

• A)the consumer has concave indifference curves.
• B)the government prohibits resale of the good.
• C)the price of other goods also falls.
• D)the subsidized quantity of the good is fixed.

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Definitions:

Western Democracies

Countries in the Western hemisphere that operate under a democratic form of government, emphasizing individual freedom and electoral representation.

Elastic Supply

A situation where the quantity supplied of a good or service changes significantly in response to changes in price.

Tax Burden

The overall impact of taxes on an individual or entity's finances, often expressed as a percentage of income or total cost.

Deadweight Loss

The loss of gains from trade to buyers and sellers that occurs when a tax is imposed. The deadweight loss imposes a burden on both buyers and sellers over and above the actual payment of the tax.