What is the impact of a government subsidy to producers?
A) Less is produced relative to the efficient level, creating a deadweight loss.
B) More is produced relative to the efficient level, creating a deadweight loss.
C) Producer surplus is increased, which creates a larger consumer surplus.
D) Producers are able to sell the product at a higher price.
E) Consumers must pay a higher price for the good.

Question

Quizplus · Accepted Answer

A government subsidy to producers lowers their production costs, leading to an increase in production beyond the efficient level, which can create a deadweight loss.

What Is the Impact of a Government Subsidy to Producers