Governments can use subsidies
A) as a means of increasing government spending.
B) to achieve an efficient outcome if there are external benefits.
C) to achieve an efficient outcome if there are external costs.
D) when they want to increase taxes.

Question

Quizplus · Accepted Answer

Subsidies can be used to correct market failures due to external benefits by making socially beneficial goods and services more affordable, thus achieving a more efficient outcome.

Governments Can Use Subsidies