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