question 39 :answer and explain

37. Which of the following is true of an excise subsidy? a. An excise subsidy has both an income and a substitution the subsidized good to rise n excise subsid y has a substitution effect since the subsidy artificially l good causing the consumer to increase consumption of the go subsidized effect. but at a lower cost to the government. no substitution effect. n excise subsidy increases consumption of a good by the same quantity n excise subsidy has an income effect since the subsidy increases the co 38. In which of the following cases can a subsidy possibly harm its recipients? When consumption of the subsidized good is mandatory When the subsidy is fully funded by the government When the subsidy is targeted at low-income groups When the good that is subsidized is a luxury good c. d. Use Figure 5-5 and the following information to answer questions 39 and 40: A fam schooling, before and after a fixed-quantity subsidy, are shown in Figure 5-5. Prior to th n equilibrium at point J. Assume that public schooling cannot be supplemented with pri Figure 5-5 Composite good Public schooling 39. After the fixed-quantity subsidy has been introduced, the family consumes: a. its optimum level of other goods. b. less than its optimum quantity of schooling. more than its optimum quantity of schooling d. less than its optimum quantity of other goods. 40. Suppose the government offers education vouchers of value SBO instead of The budget line will become a MATN b. AS c. MN d. MAS