When a country provides a home producer a subsidy, it:
A)causes the consumer surplus to decline.
B)causes the producer surplus to decline.
C)causes government cost to decline.
D)causes no change in the consumer surplus.

Question

Quizplus · Accepted Answer

A subsidy to domestic producers increases the supply of the good, which lowers the equilibrium price and increases the quantity supplied. This benefits consumers by increasing consumer surplus.

When a Country Provides a Home Producer a Subsidy, It