Which of the following statements is TRUE? A tax and subsidy are similar in that:
I. they both create a deadweight loss.
II. the burden of the tax and benefit of the subsidy depend on relative elasticities of demand and supply.
III. they both change the equilibrium level of output.
A) I only
B) I and II only
C) I, II, and III
D) I and III only

Question

Quizplus · Accepted Answer

Both taxes and subsidies can create deadweight loss, affect the distribution of economic benefits based on elasticities, and alter the equilibrium output level.

Which of the Following Statements Is TRUE? a Tax and Subsidy