(Figure: Market for Gallons I) Figure: Market for Gallons I shows the effect of a government subsidy. Which of the following statements is (are) TRUE? I. The area of the deadweight loss is C + D + E + G + H + I.
II) The subsidy causes producer surplus to increase from area F + G + H to area F + G + H + I.
III) The government's cost of the subsidy is area B + C + D + E + F + G + H + I.
IV) With the subsidy, consumer surplus is area A + B + C + D + E.

Question

(Figure: Market for Gallons I) Figure: Market for Gallons I shows the effect of a government subsidy. Which of the following statements is (are) TRUE?  I. The area of the deadweight loss is C + D + E + G + H + I.
II) The subsidy causes producer surplus to increase from area F + G + H to area F + G + H + I.
III) The government's cost of the subsidy is area B + C + D + E + F + G + H + I.
IV) With the subsidy, consumer surplus is area A + B + C + D + E.

Quizplus · Accepted Answer

The Answer of (Figure: Market for Gallons I) Figure: Market for Gallons I shows the effect of a government subsidy. Which of the following statements is (are) TRUE?  I. The area of the deadweight loss is C + D + E + G + H + I.
II) The subsidy causes producer surplus to increase from area F + G + H to area F + G + H + I.
III) The government's cost of the subsidy is area B + C + D + E + F + G + H + I.
IV) With the subsidy, consumer surplus is area A + B + C + D + E.