📚 Learning Guide
Types of Subsidies
easy

Lump sum subsidy : one-time payment :: Per unit subsidy : ?

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Learning Path
Learning Path

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Choose the Best Answer

A

ongoing payment for each unit produced

B

payment based on total revenue

C

fixed cost subsidy

D

tax rebate for production

Understanding the Answer

Let's break down why this is correct

Answer

A lump sum subsidy is a one-time payment given to help someone financially, while a per unit subsidy is a payment made for each unit of a product or service sold or produced. This means that instead of receiving all the money at once, a person or business gets a specific amount of money for every unit they sell. For example, if a farmer receives a per unit subsidy of $2 for every bushel of corn they sell, they will get $2 each time they sell a bushel, rather than a single payment for all their corn at once. This approach encourages production because the more they produce, the more subsidy they receive. So, you can think of the relationship as lump sum subsidy being to one-time payment as per unit subsidy is to recurring payments based on production.

Detailed Explanation

A per unit subsidy gives money for every single item made. Other options are incorrect because Some might think this means getting money based on how much you earn overall; A fixed cost subsidy is a set amount given, no matter how much you produce.

Key Concepts

Types of Subsidies
Government Intervention
Market Dynamics
Topic

Types of Subsidies

Difficulty

easy level question

Cognitive Level

understand

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