When a country provides a subsidy to a home producer, it:
A) causes the consumer surplus to decline.
B) causes the producer surplus to decline.
C) causes government cost to decline.
D) causes no change in the consumer surplus.

Question

Quizplus · Accepted Answer

A subsidy to a home producer increases the producer surplus by the amount of the subsidy, but does not affect the consumer surplus.

When a Country Provides a Subsidy to a Home Producer