Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They decrease the firm's marginal costs, encouraging more production.
B
They lead to overproduction of goods regardless of demand.
C
They only benefit consumers by lowering prices.
D
They eliminate the need for firms to consider production costs.
Understanding the Answer
Let's break down why this is correct
Answer
Per unit subsidies are payments made by the government to firms for each unit of product they produce. These subsidies lower the cost of production, making it cheaper for firms to create goods. When a firm receives a subsidy, it can either lower its prices to attract more customers or increase its profits without changing prices. For example, if a farmer receives a subsidy for each bushel of corn produced, they may choose to grow more corn because it will be more profitable. This can lead to increased production in the market, potentially affecting supply and prices.
Detailed Explanation
Per unit subsidies lower the cost of making each product. Other options are incorrect because Some might think subsidies always lead to too much production; It's a common belief that only consumers gain from subsidies.
Key Concepts
Per Unit Subsidies
Marginal Costs
Allocative Efficiency
Topic
Per Unit Subsidies in Economics
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.