Answered

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A subsidy causes a deadweight loss since people only make a purchase because the subsidy _____ the price. The amount they value the extra quantity is _____ than it costs the government to move them to buy it.

Sagot :

Parrain

Answer: lowers; less

Explanation:

Subsidies are usually given on public goods which the government wants the public to buy more of. For this reason, these goods will cost less than they should on account of the government paying some of the cost.

The deadweight loss arises because the government is paying more than consumers would have paid in order to entice the consumers to buy the good. Essentially the cost to the government is higher than the consumer surplus which creates a deadweight loss.

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