If the government decides to pay producers of houses $2,000 for every house they produce,

Question

Quizplus · Accepted Answer

By offering producers a subsidy for every house they produce, the cost of production per unit decreases which increases profits for the producers. This will lead to an increase in the supply of houses, as producers are willing to build more houses even if the price of each house remains the same. Therefore, the best choice is E.

If the Government Decides to Pay Producers of Houses $2,000