If the government subsidizes activities with external benefits, the market price falls and people consume more.

Question

Quizplus · Accepted Answer

When the government subsidizes activities with external benefits, it effectively lowers the cost of production for the producers. This causes a downward shift in the supply curve, resulting in a lower market price. As the price falls, consumers are incentivized to consume more of the product, leading to an increase in consumption.

If the Government Subsidizes Activities with External Benefits, the Market