-The figure above shows the market for milk in Cowland. A subsidy paid to producers of $1 per gallon of milk is introduced. If there are no external costs and no external benefits, the quantity of milk sold is

Question

Quizplus · Accepted Answer

A subsidy to producers lowers the cost of production, leading to an increase in supply. This results in a quantity of milk sold that is greater than the efficient level of output, as the subsidy causes overproduction beyond the equilibrium where marginal cost equals marginal benefit.

-The Figure Above Shows the Market for Milk in Cowland