📚 Learning Guide
Government Subsidies and Market Effects
hard

Government subsidies are to market supply as tax increases are to what?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

Decreased market demand

B

Increased production costs

C

Enhanced consumer choice

D

Improved product quality

Understanding the Answer

Let's break down why this is correct

Answer

Government subsidies help increase market supply by making it cheaper for producers to create goods and services. When the government gives money to businesses, they can produce more, which usually leads to lower prices for consumers. On the other hand, tax increases can decrease market supply because they make it more expensive for businesses to operate. When businesses have to pay more in taxes, they may produce less or raise their prices to cover the extra costs. For example, if a factory faces higher taxes, it might cut back on production, leading to fewer products available in the market.

Detailed Explanation

When taxes go up, businesses have to pay more money. Other options are incorrect because Some might think that higher taxes mean people will buy less; It might seem that taxes could help consumers by improving services.

Key Concepts

Government subsidies
Market supply and demand
Taxation effects
Topic

Government Subsidies and Market Effects

Difficulty

hard level question

Cognitive Level

understand

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