A subsidy in an industry would be likely to increase the consumer surplus for buyers in that industry and increase the producer surplus for sellers in that industry.

Question

Quizplus · Accepted Answer

A subsidy would lower the cost of production for the producers, allowing them to increase their supply and potentially lower their prices. This would increase the consumer surplus for buyers by enabling them to purchase the goods at a lower price. At the same time, the subsidy would increase the profit margins and revenue for producers, leading to an increase in their producer surplus.

A Subsidy in an Industry Would Be Likely to Increase