Which one of the following statements about subsidies is NOT correct?
A) Subsidies cause deadweight losses.
B) Who actually receives the subsidy does not depend on who gets the check from the government.
C) Subsidies always increase the gains from trade for producers.
D) Who benefits from the subsidy depends on the relative elasticities of demand and supply.

Question

Quizplus · Accepted Answer

This statement is not always true. While subsidies may increase the gains from trade for producers in some cases, in other cases, the benefits may be offset by the costs of production and transportation, resulting in little or no net gain.

Which One of the Following Statements About Subsidies Is NOT