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Economics · May / June 2021 · Paper 12 · Question 6

2281Mixed economic system

Which problem will be reduced by a government subsidy to a firm?

  1. Aabsence of a public good
  2. Babuse of monopoly power
  3. Coverconsumption of a demerit good
  4. Dunderconsumption of a merit good

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Correct answer: D. underconsumption of a merit good

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