A subsidy involves the government paying an extra amount to producers or consumers, is used to encourage production and consumption, and can be an alternative to price controls, making all statements true.

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A Subsidy

Question 135

Multiple Choice

A subsidy:

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

Correct Answer: