The imposition of a subsidy rather than a tariff will:
A) reduce domestic supply and increase imports.
B) prevent a price increase for the domestic consumers.
C) have no affect on government revenue.
D) shift the domestic supply curve upwards.

Question

Quizplus · Accepted Answer

A subsidy will reduce the cost of production for domestic producers, making them more competitive with foreign producers. This will lead to an increase in domestic supply and a decrease in imports.

The Imposition of a Subsidy Rather Than a Tariff Will