Which of the Following Statements Is TRUE Regarding Subsidy

question 170

Multiple Choice

Which of the following statements is TRUE regarding subsidy?

• A) A subsidy causes the value of goods to exceed the cost of producing the goods.
• B) A subsidy reduces deadweight loss of nonbeneficial trade.
• C) A subsidy means that the sellers receive less than buyers pay.
• D) Suppliers receive more benefit of a subsidy if the elasticity of supply is less than the elasticity of demand.

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Definitions:

Common Fixed Expenses

Costs that do not vary with the level of production or sales over a certain period and are shared among different segments or products of the business.

Absorption Costing

This accounting approach incorporates every manufacturing expense, such as direct materials, direct labor, plus variable and fixed overhead costs, into the product's total cost.

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Product Costs

The costs directly associated with the creation of a product, encompassing direct materials, direct labor, and manufacturing overhead.