Subsidies
A) Are like taxes in that they create deadweight loss
B) Are like taxes in that they reduce sales of the subsidized good
C) Are likw taxes in that they increase sales of the subsidized good
D) Are like taxes in that they do not create deadweight loss

Question

Quizplus · Accepted Answer

Subsidies, like taxes, can create deadweight loss by distorting market outcomes. However, unlike taxes that typically reduce the quantity sold of the taxed good, subsidies increase the quantity sold of the subsidized good by lowering the effective price to consumers or increasing the effective price received by producers.