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Suppose a government creates a new subsidy to producers of a service in a competitive market with no externalities. Once the market has time to
Suppose a government creates a new subsidy to producers of a service in a competitive market with no externalities. Once the market has time to adjust to a new equilibrium, the amount actually produced in the market will be:
a
equal to the allocatively efficient amount.
b
less than the allocatively efficient amount.
c
greater than the allocatively efficient amount.
d
either less than or equal to depending upon the size of the subsidy.
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