APFIVE Subsidies and Long-Run Supply Elasticity
If a subsidy is granted to wheat farmers, what is likely to happen to the elasticity of supply for wheat over time?
A
The elasticity may increase as farmers invest and expand production capacity
B
The subsidy will make the supply perfectly elastic because farmers will produce unlimited quantities
C
The elasticity should decrease due to an inevitable surplus of wheat on the market
D
There is no change; subsidies do not affect how responsive quantity supplied is to a change in price
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