-If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n) I. increase in the quantity demanded.
II) decrease in the out-of-pocket price paid by consumers.
III) increase in the quantity supplied by producers.
A) I only
B) both I and II only
C) both II and III only
D) I, II, and III

Question

-If the government pays a per-unit subsidy to the producer of a service, we would expect to see a(n) I. increase in the quantity demanded.
II) decrease in the out-of-pocket price paid by consumers.
III) increase in the quantity supplied by producers.
A) I only 
B) both I and II only 
C) both II and III only 
D) I, II, and III

Quizplus · Accepted Answer

When the government pays a per-unit subsidy to producers, it effectively lowers the cost of production for those producers. This typically leads to a decrease in the price consumers have to pay (II), as producers can afford to sell the service for less. The lower price increases the quantity demanded (I) because more consumers are willing or able to purchase the service at the lower price. Additionally, the subsidy makes producing the service more profitable, encouraging producers to increase the quantity supplied (III).

-If the Government Pays a Per-Unit Subsidy to the Producer