If the government decides to pay producers of houses $5,000 for every house they build,

Question

Quizplus · Accepted Answer

If the government gives a subsidy of $5,000 per house to producers, it lowers their cost of production. This means that they will be willing to produce more houses at a lower price than before. Therefore, producers will be willing to build more houses, even if the price does not rise. This leads to an increase in the quantity supplied of houses. Consumers may or may not buy more houses, depending on their preference and ability to pay. Therefore, options A, B, C, and D are incorrect.

If the Government Decides to Pay Producers of Houses $5,000