If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n)
I. increase in the quantity demanded.
II. decrease in the out-of-pocket price paid by consumers.
III. increase in the quantity supplied by producers.
A) I only
B) both I and II only
C) both II and III only
D) I, II, and III
Answer: D
You might also like to view...
The food processing industry in Richland accounts for 20% of its GDP
Which of the following will happen if firms in this industry become pessimistic about the future demand for their products? Assume that consumption and government expenditure remains unchanged. A) Richland's unemployment rate will fall. B) Richland's interest rate will increase. C) Richland's inflation rate will increase. D) Richland's GDP will fall.
A firm wishes to shut down an office and fire 100 employees. The company will save $3000 per month per employee. It is estimated that each employee contributes $4,100 to the company. The firm rents office space for this group of employees at $1500 . What should the company do?
a. Fire the employees and save $1500 on rent b. Not fire the employees keeping them generates a profit of $1100 per employee c. Not fire the employees since keeping them generates a profit of $1085 per employee d. None of the above
Higher prices will increase total revenue if
A. Demand is inelastic. B. The price elasticity of demand is zero. C. Demand is unitary elastic. D. Demand is elastic.
The "new product bias" in the consumer price index refers to the idea that
A) consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. B) consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. C) consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. D) new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.