Who actually benefits from a subsidy to sellers?
A. Only consumers benefit from any kind of subsidy.
B. Only sellers benefit, since it is their subsidy.
C. The benefit is shared depending on elasticity of the supply and demand curves.
D. None of these statements is true.
C. The benefit is shared depending on elasticity of the supply and demand curves.
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What will be an ideal response?
Suppose Orange Inc sells MP3 players and initially has monopoly power because there are only a few close substitutes available to consumers
As more types of MP3 players are introduced into the market, the demand facing Orange becomes ________ elastic and the Lerner index achieved by the firm in this market ________. A) less, declines B) less, increases C) more, declines D) more, increases