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If the Government Subsidizes a Product, What Is the Relationship

Question 21

Multiple Choice

If the government subsidizes a product, what is the relationship between the price that buyers pay (PB) and the price that sellers receive (PS) ?


A) PB + subsidy = PS
B) PB + PS = subsidy
C) PB = PS + subsidy
D) PB (1 + subsidy) = PS

Correct Answer:

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