Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It would increase production, reduce prices to consumers, and lead to allocative efficiency as the price approaches marginal cost.
B
It would decrease production as firms become less reliant on market prices, leading to inefficiencies.
C
It would increase production but may not affect prices, resulting in allocative inefficiency.
D
It would lead to overproduction, causing a surplus in the market and raising prices for consumers.
Understanding the Answer
Let's break down why this is correct
Answer
When a government gives per unit subsidies to solar panel manufacturers, it lowers their production costs, which encourages them to produce more solar panels. This increase in supply can lead to lower prices for consumers, making solar panels more affordable. As prices drop, more people are likely to buy solar panels, which can lead to a higher use of renewable energy. This shift towards solar energy can improve allocative efficiency because resources are being used in a way that better meets consumer demand for clean energy. For example, if solar panels become cheaper and more people install them, this could lead to a cleaner environment and greater satisfaction among consumers who value sustainability.
Detailed Explanation
Subsidies help manufacturers make more solar panels. Other options are incorrect because This option suggests that subsidies make companies less focused on prices; This answer claims production goes up but prices stay the same.
Key Concepts
Per Unit Subsidies
Allocative Efficiency
Market Dynamics
Topic
Per Unit Subsidies in Economics
Difficulty
medium level question
Cognitive Level
understand
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