Which of the following statements is TRUE?
I. Subsidizing buyers is no different than subsidizing sellers.
II. Unlike taxes, subsidies do not create deadweight losses.
III. Subsidies are payments the government makes to either producers or consumers.
IV. Taxpayers pay for subsidies.
A) I and II only
B) I, III, and IV only
C) II and III only
D) I, II, III, and IV

Question

Quizplus · Accepted Answer

Statement I is true because subsidizing either buyers or sellers has the same effect on the market. Statement II is false because subsidies can create deadweight losses when they distort market prices and encourage overproduction or consumption. Statement III is true because subsidies are payments made by the government to either producers or consumers to encourage a certain behavior or support a particular industry. Statement IV is true because taxpayers ultimately fund government subsidies.

Which of the Following Statements Is TRUE