Practice Questions
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What is the primary purpose of export subsidies in international trade?
Export subsidies help local businesses sell their products to other countries. Other options are incorrect because Some might think subsidies help the...
Which of the following best describes how consumption subsidies can impact the consumption of demerit goods?
When the government gives money to lower the price of demerit goods, more people can afford them. Other options are incorrect because This answer sugg...
Which of the following best describes the role of subsidy programs in enhancing social welfare?
Subsidy programs give money to certain industries. Other options are incorrect because Some might think subsidies make things more expensive; It's a c...
How can government intervention through subsidies help reduce the consumption of demerit goods in the context of fiscal policy?
Subsidies can lower the price of healthier alternatives. Other options are incorrect because Some might think that raising prices will stop people fro...
Which type of subsidy can lead to an increase in the consumption of demerit goods by making them cheaper, while simultaneously impacting the import of competing products?
Import subsidies make it cheaper to buy certain goods from other countries. Other options are incorrect because Some might think export subsidies help...
What is a direct subsidy in the context of government financial support?
A direct subsidy is money the government gives to a business. Other options are incorrect because Some might think a tax break is the same as a direct...
What are indirect subsidies?
Indirect subsidies help producers by lowering their costs. Other options are incorrect because Some might think indirect subsidies go directly to cons...
What type of subsidy is primarily aimed at increasing the production of goods by lowering production costs for producers?
Production subsidies help producers by giving them money or support. Other options are incorrect because These subsidies help consumers buy goods, not...
A __________ subsidy is a one-time payment made by the government to firms, while a per unit subsidy incentivizes increased output by providing payments for each unit produced.
A lump sum subsidy is a single payment given to companies. Other options are incorrect because A variable subsidy suggests payments change based on di...
A government decides to give a one-time payment to a renewable energy firm to encourage start-up costs. How should this subsidy be classified?
A lump sum subsidy is a one-time payment. Other options are incorrect because A per unit subsidy pays a set amount for each item produced; This type o...
Which of the following statements accurately describe the differences between lump sum subsidies and per unit subsidies? Select all that apply.
Other options are incorrect because Some might think lump sum subsidies encourage more production; It's easy to confuse per unit subsidies with regula...
Arrange the following types of subsidies in the order they would most likely impact a firm's production decisions, starting from the least impactful to the most impactful: A) Lump sum subsidy, B) Per unit subsidy, C) Increase in demand, D) Tax credit.
This order shows how each type affects a firm's choices. Other options are incorrect because This option suggests that a per unit subsidy is less impa...
If a government decides to implement a per unit subsidy for a specific industry, how is this likely to affect the short-run production decisions of firms in that industry?
When the government gives money for each unit made, it lowers the cost for firms. Other options are incorrect because Some might think subsidies don't...
How do lump sum subsidies differ from per unit subsidies in their effect on firm behavior?
Per unit subsidies give money for each item produced. Other options are incorrect because Some might think lump sum subsidies lower costs for each ite...
In what scenario would a lump sum subsidy be more effective than a per unit subsidy for a firm seeking to reduce short-term production costs?
A lump sum subsidy helps a firm with fixed costs. Other options are incorrect because Some might think a per unit subsidy is better for increasing pro...
Lump sum subsidy : one-time payment :: Per unit subsidy : ?
A per unit subsidy gives money for every single item made. Other options are incorrect because Some might think this means getting money based on how ...
A local bakery receives a one-time lump sum subsidy from the government to help cover its operational costs. How is this type of subsidy likely to impact the bakery's production decisions in the short run compared to a per unit subsidy?
A lump sum subsidy gives the bakery extra money all at once. Other options are incorrect because This answer suggests both subsidies work the same way...
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