The individual the same dollar amount of subsidy

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One way to design a housing subsidy is to pay a certain percentage of a tenant’s rent, allowing the renter to shop for whatever housing the person thinks most appropriate. An alternative policy is to pay a fixed dollar amount toward whatever rent the person chooses. (Assume that the program is not generous enough to pay more than the tenant’s entire rent.) Which of the following statements is not true if, in equilibrium, the two programs are transferring to the individual the same dollar amount of subsidy? a. The tenant consumes more housing under the price subsidy program. b. The tenant has more utility under the fixed dollar transfer program. c. There is a greater efficiency loss under the price subsidy program. d. The tenant is spending exactly the fixed dollar transfer on housing and no more.

Reference no: EM131195297

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