Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The supply curve for electric vehicles shifts to the right, leading to lower prices and increased quantity produced.
B
The demand for electric vehicles decreases as consumers anticipate future price increases.
C
Manufacturers will reduce their production costs but will not change their output levels due to market saturation.
D
The subsidy will lead to an increase in marginal costs, causing firms to produce less.
Understanding the Answer
Let's break down why this is correct
Answer
When a government gives a per unit subsidy to electric vehicle manufacturers, it lowers the cost of producing each vehicle. This means manufacturers can produce more cars without raising prices, which encourages them to make even more electric vehicles. As a result, the supply of electric vehicles in the market increases, making them more available to consumers. For example, if a manufacturer usually makes 1,000 cars a month, the subsidy might allow them to produce 1,500 cars instead. This increase in supply can lead to lower prices for consumers, making electric vehicles more affordable and promoting their use.
Detailed Explanation
When the government gives money to manufacturers for each electric vehicle made, it lowers their costs. Other options are incorrect because This option suggests that people will buy fewer electric vehicles because they think prices will go up later; This option implies that manufacturers won't change how many cars they make even if costs go down.
Key Concepts
Per unit subsidies
Market supply dynamics
Allocative efficiency
Topic
Per Unit Subsidies in Economics
Difficulty
hard level question
Cognitive Level
understand
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