When a government subsidy is granted to the sellers of a product, buyers can end up capturing some of the benefit because
A) the market price of the product will fall in response to the subsidy.
B) the market price of the product will rise in response to the subsidy.
C) the market price of the product will not change in response to the subsidy.
D) producers will reduce the supply of the product.

Question

Quizplus · Accepted Answer

When a subsidy is granted to sellers, it effectively lowers their costs, allowing them to supply more at every price level. This increased supply typically leads to a lower market price, enabling buyers to purchase the product at a reduced cost, thus capturing some of the subsidy benefit.

When a Government Subsidy Is Granted to the Sellers of a Product