Why is there a deadweight loss associated with subsidy payments?
A) There is no deadweight loss from a subsidy.
B) Quantity supplied is less than the equilibrium amount, so consumers and producers lose surplus value on those units that are no longer produced.
C) Quantity supplied exceeds the equilibrium amount, and consumer willingness to pay for these additional units is smaller than the marginal cost of producing them.
D) The subsidy payment does not distort quantities in the market, but the government cost exceeds consumer willingness to pay for the quantity demanded.
Question 2
If a firm can earn a profit stream of 50,000 per year for 10 years, that profit stream is worth
A) more than 500,000 today.
B) 500,000 today.
C) less than 500,000 today, but a positive amount.
D) nothing today
E) some amount, but whether it is more, less or the same as 500,000 cannot be determined.
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