APFIVE Government Subsidy and Unintended Consequences
If a government implements a subsidy on electric vehicles to reduce carbon emissions, which possible unintended consequence can arise when considering both supply and demand?
A
Consumers may not change their preferences at all, resulting in no significant increase in electric vehicle sales despite the subsidy.
B
The market for gasoline vehicles might contract, leading to job losses in traditional car manufacturing sectors.
C
The increase in demand for electric vehicles might perfectly offset the decrease in demand for gasoline vehicles, maintaining overall market stability.
D
Manufacturers of electric vehicles could ignore the subsidy, keeping prices unchanged and pocketing the extra revenue as profit.
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