Subsidy increase the efficiency of the market

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Theory suggests that, in the absence of market failures, placing an excise tax on the market for a good leads to a deadweight loss for society. Think about a situation where the government instead subsidizes the purchase of the good. This subsidy is equivalent to a negative excise tax. If the excise tax produces a deadweight loss, then does the subsidy increase the efficiency of the market?

Reference no: EM131393427

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