A subsidy in an industry would result in:
A)an increase in consumer surplus.
B)an increase in producer surplus
C)both (a) and (b).
D)none of the above.

Question

A subsidy in an industry would result in:
A)​an increase in consumer surplus.
B)​an increase in producer surplus
C)​both (a) and (b).
D)​none of the above.

Quizplus · Accepted Answer

A subsidy in an industry would result in a decrease in the cost of production for producers, leading to an increase in the supply of the good. This results in an increase in producer surplus. Additionally, the decreased cost of production would result in lower prices for customers, leading to an increase in demand and an increase in consumer surplus. Therefore, both producer and consumer surplus increase with the implementation of a subsidy.

A Subsidy in an Industry Would Result In