Tobacco production is one of the more heavily subsidized industries in the United States. Suppose that as a result of intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following scenarios would likely occur?
A) The tobacco firms' supply curve would shift rightward, as it would now be cheaper to produce each level of output.
B) The tobacco firms' supply curve would shift leftward, since it would now cost more to produce each level of output.
C) The tobacco firms would not experience any shift in their supply curves; subsidies don't affect output.
D) There would be a movement along the supply curve for tobacco, but the supply curve would not shift.
B
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In the above table, the efficient level of output can be achieved through a per unit
A) subsidy of $20. B) tax of $20. C) subsidy of $60. D) tax of $60.
Figure 16-1
In Figure 16-1, there are four levels of income. G is government expenditures and TT is taxes less transfers. At which level of income is the actual deficit the greatest?
a.
Y4
b.
Y3
c.
Y2
d.
Y1