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The Value of a Price-Distorting Subsidy for a Three-Bedroom Apartment

Question 21

Multiple Choice

The value of a price-distorting subsidy for a three-bedroom apartment is $100 per month.This means that the person choosing to live in an apartment of that size would have to pay an extra $100 per month at the market rent.Then it follows that:


A) that person would be worse off if she received a cash subsidy of $100 per month.
B) that person would be better off if she received a cash subsidy of $100 per month.
C) that person would be just as well off if she received a cash subsidy of less than $100 per month.
D) Both (b) and (c) are correct.

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