Choose the correct statement.
A)Producer surplus is an external cost.
B)Consumer surplus is an external benefit.
C)A government subsidy paid to a producer is an external benefit.
D)Consumer surplus is an external cost.
E)Subsidies lead to overproduction.

Question

Quizplus · Accepted Answer

Subsidies increase the supply of a good, which can lead to overproduction because producers are being incentivized to produce more than the market demands. This can result in a surplus of the good that may not be sold, and ultimately lead to a waste of resources.

Choose the Correct Statement