📚 Learning Guide
Government Subsidies and Market Effects
medium

Government subsidies always lead to an increase in market efficiency by reducing prices for consumers, regardless of the industry affected.

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Learning Path

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Choose the Best Answer

A

True

B

False

Understanding the Answer

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Answer

Government subsidies are financial support that the government gives to certain industries to help them succeed. While these subsidies can lower prices for consumers, making goods more affordable, they do not always lead to greater market efficiency. For example, if a government subsidizes corn production, it may encourage farmers to grow more corn than is actually needed, leading to overproduction. This can waste resources and disrupt the balance of supply and demand. Therefore, while subsidies can help some consumers in the short term, they can also create long-term inefficiencies in the market.

Detailed Explanation

Subsidies do not always help. Other options are incorrect because Many think subsidies help all the time.

Key Concepts

Government Subsidies
Market Efficiency
Consumer Behavior
Topic

Government Subsidies and Market Effects

Difficulty

medium level question

Cognitive Level

understand

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