<span>When the economy is experiencing an expansion automatic stabilizers will cause transfer payments to decrease and tax revenues to decrease. A transfer payment is a payment that is made but no goods or services are being paid for. Automatic stabilizers are policies and programs set up in the economy to offset the up and down of an economy to keep the government out of the situation on a daily basis.
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Answer:
The correct answer is letter "D": The firm must be subsidized or it will go bankrupt.
Explanation:
A subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or economic policy. The government usually provides subsidies in the form of cash or tax breaks, low-rate loans, and certain types of rebates.
In the example, as the commission sets the price of the monopoly products below the average total cost, it will be translated in losses. Then, a subsidy will be necessary to be provided otherwise the company will file for bankruptcy.
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