If the government subsidizes the production of a good
A) an efficient outcome for producers occurs.
B) overproduction relative to the efficient quantity occurs.
C) a deadweight loss is created.
D) Both answers B and C are correct.
D
You might also like to view...
The following appeared in a Florida newspaper a week after a hurricane hit the state. "Floridians are relieved that the storm produced no fatalities but homeowners face weeks, if not months, of rebuilding. Matters are made worse by the soaring prices of plywood and other building materials that always follow in a hurricane's path. Complaints of profiteering and price gouging have not deterred firms from raising their prices by over 100 percent." Which of the following offers the best explanation for the price increases referred to in the article?
A) The hurricane caused an increase in the demand for building materials. B) The hurricane created an artificial shortage of building materials. C) There was a reduction in supply as firms shipped plywood and other materials to locations not affected by the storm. D) The hurricane reduced the number of suppliers of building materials.
All else equal, if job turnover has people leaving jobs and finding new jobs in the same industry, this will
A) decrease the supply of labor, but not change the demand for labor. B) increase the demand for labor and the supply of labor. C) increase the demand for labor and decrease the supply of labor. D) not change demand or supply in the labor market.
Which of the following is not one of the four principles of individual decision making?
a. People face trade-offs. b. Trade can make everyone better off. c. People respond to incentives. d. Rational people think at the margin.
Simple majority rule will almost always generate efficient outcomes
Indicate whether the statement is true or false