Question

5) In contrast with a voucher, a subsidy

a) works through a consumer’s income

b) discourages the consumption of the good being subsidized

c) often succeeds in turning corner solutions into interior solutions

d) none of the above

6) A voucher will generally increase the consumption of the good in question. This sentence is

a) always true because income effects are typically positive

b) sometimes true because the good in question may be a bad

c) all of the above

d) none of the above

Answer 1

5) Answer: a) works through a consumer’s income

A voucher can be availed by anyone irrespective of the income but a subsidy is given to only those below a certain income level.

6) b) sometimes true because the good in question may be a bad