When Comparing a Cash Subsidy and a Voucher Worth the Same

question 59

Multiple Choice

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

• A)a consumer can never be better off with a cash subsidy than with a voucher.
• B)a consumer can never be better off with a voucher than with a cash subsidy.
• C)a cash subsidy will always make the consumer better off than the consumer would be with a voucher.
• D)a voucher will always make the consumer better off than the consumer would be with a cash subsidy.

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Definitions:

Competitive Price-Taker

A competitive price-taker is a firm or individual that has no control over market prices and must accept the prevailing market price as is.

Market Price

The current price at which a good or service can be bought or sold in a marketplace, determined by supply and demand dynamics.

Revenues

The income generated from normal business operations, calculated as the selling price of goods or services times the quantity sold.

Competitive Price-Taker

A Competitive Price-Taker is an individual or company that has no control over the market prices and must accept the prevailing prices as given.