When the supply of a good is perfectly elastic:
A) no one benefits from the subsidy.
B) everyone benefits from the subsidy.
C) all of the benefits of the subsidy go to producers.
D) all of the benefits of the subsidy go to consumers.

Question

Quizplus · Accepted Answer

When the supply of a good is perfectly elastic, producers can easily increase their output in response to an increase in demand without a change in price. Therefore, the entire subsidy will be passed on to consumers in the form of a lower price, and all the benefits of the subsidy will go to consumers.

When the Supply of a Good Is Perfectly Elastic