All three statements are true. A subsidy is a payment made by the government to producers or consumers of a good in order to encourage the production or consumption of that good. Subsidies can be used as an alternative to price controls to benefit certain groups without generating a shortage or excess supply.

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A Subsidy

Question 141

Multiple Choice

A subsidy:

A) is a requirement that the government pay an extra amount to producers or consumers of a good.
B) is used by governments to encourage the production and consumption of a particular good or service.
C) is used by governments as an alternative to price controls to benefit certain groups without generating a shortage or excess supply.
D) All of these statements are true.

Correct Answer: