ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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They increase costs
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The increase revenues
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They increase foreign competition
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They remove regulations
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Detailed explanation-1: -The subsidy lowers the cost for the producers to bring the good or service to market. If the right level of subsidization is provided, all other things being equal, then the market failure should be corrected.
Detailed explanation-2: -1. Production subsidy. This type of subsidy is provided in order to encourage the production of a product. In order for manufacturers to increase their production output, the government compensates for some of its parts in order to lessen their expenses while increasing their output.
Detailed explanation-3: -When government subsidies are implemented to the supplier, an industry is able to allow its producers to produce more goods and services. This increases the overall supply of that good or service, which increases the quantity demanded of that good or service and lowers the overall price of the good or service.
Detailed explanation-4: -In the case of indirect subsidies, there is no payment made or monetary transfers conducted. Instead of cash, subsidies are provided as tax benefits or reductions in the prices of goods or services. Concessions such as those mentioned above lead to increased savings for the concerned parties.