A subsidy is paid to the producers of a good that has perfectly elastic demand. What outcome will follow?
- AConsumer and producer receive equal amounts of subsidy.
- BThere will be no change in price; the incidence of the subsidy will fall on the producer.
- CThere will be a large increase in quantity consumed; the incidence of the subsidy will fall on the consumer.
- DThere will be no change in the quantity consumed; the incidence of the subsidy will fall on the consumer.