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WorksheetsSubsidies Eco opt2
Total questions: 6
Worksheet time: 4mins
What is a subsidy?
Direct payments made by Producers to the Consumers
Direct payments made by Government to the Producers
Direct payments made by Government to the Consumers
Direct payments made by Government to the Stakeholders
Why does the government give subsidies?
To reduce negative externalities in a market
To increase consumption of merit goods
To increase the interest rate
To reduce travel costs
Which 2 of the following are advantages of subsidies?
Reduces the price of raw materials
Reduces producer's cost of production
Increases production/output
Increases consumer's income
The government grants subsidy to producers. What are the 2 effects of this?
Price changes from P1-P
Quantity changes from Q-Q1
Quantity changes from Q1-Q
Price changes from P-P1
When PED<1,a subsidy will reduce cost of production AND prices which will result in...a 1._________ percentage change in 2.________
1.Greater, 2.Price
1.Lower, 2.Demand
1.Greater, 2.Demand
1.Lower, 2.Price
One effect of the subsidy is to increase:
Market Failure
Consumer surplus
Tax revenue
Producer surplus
