The statement that is NOT true regarding subsidies is:
When a subsidy is present, the price received by sellers exceeds the price paid by buyers.
This statement is misleading because, in the case of a subsidy, the price paid by buyers is typically lower than the price received by sellers. The subsidy effectively lowers the cost for buyers while increasing the revenue for sellers, but it does not imply that the price received by sellers exceeds the price paid by buyers in a straightforward manner. Instead, the subsidy creates a gap where the seller receives a higher effective price due to the subsidy, while buyers pay a lower price.
The other statements regarding subsidies are generally true:
- Subsidies can create deadweight loss, similar to taxes.
- The main beneficiary of a subsidy is indeed the party that directly receives the check from the government.
- Subsidies can lead to inefficient increases in trade by encouraging production and consumption that would not occur in a free market.