A Subsidy Causes Deadweight Loss

question 57

Multiple Choice

A subsidy causes deadweight loss:

• A) only because of inefficient increases in trade.
• B) only because of unexploited gains from trade.
• C) because of both inefficient increases in trade and the unexploited gains from trade.
• D) only if the supply of the good being subsidized is unit elastic.

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Definitions:

Permanent/Temporary

Designations for accounts or job positions that indicate if they are expected to last indefinitely or have a fixed duration, respectively.

Gross Method

An accounting method for recording purchases at the invoice amount without deducting any discounts offered.

Periodic Method

An inventory accounting system where updates to inventory accounts and cost of goods sold are made periodically at the end of a reporting period.

Journal Entries

Recorded transactions in the accounting ledger that reflect the financial activities of a business.