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AP® Microeconomics

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Consumer Surplus: Impact of Subsidy

APMICR-S4MXXK

If the government grants a per-unit subsidy in a perfectly-competitive market, what would be the long-run impact on equilibrium price, equilibrium quantity and consumer surplus?

A

Equilibrium price would increase, equilibrium quantity would decrease and consumer surplus would decrease.

B

Equilibrium price would decrease, equilibrium quantity would increase and consumer surplus would increase.

C

Equilibrium price and quantity would increase, and consumer surplus would decrease.

D

Equilibrium price and quantity would decrease, and consumer surplus would increase.

E

Equilibrium price would decrease, equilibrium quantity would increase, and consumer surplus would decrease.