Unlike price floors, subsidies:
A) cause surpluses.
B) discourage firms from producing.
C) do not create surpluses.
D) create shortages.

Question

Quizplus · Accepted Answer

Subsidies provide financial support to firms or individuals, making it easier for them to produce goods or services. Unlike price floors, subsidies do not set a minimum price level, but rather provide financial support to reduce the cost of production. This can lead to an increase in supply, but it does not necessarily create a surplus. In fact, the goal of a subsidy is often to promote production and prevent shortages, rather than create them.

Unlike Price Floors, Subsidies