A grant which is given to producers, usually to encourage production of a certain good

A grant which is given to producers, usually to encourage production of a certain good

• A. Subsidy
• B. Tariff
• C. Tax
• D. Quota

Answer: (A)

Subsidies are payments from the government to producers designed to encourage production of a particular good. By providing extra funds or reducing production costs, subsidies boost a firm's profitability for that product, which tends to increase output and can shift the supply curve to the right. This helps make the good more available and can help keep prices at reasonable levels, especially for industries the government wants to support. That description—granting money to producers to encourage production—fits a subsidy. The other options describe different interventions: tariffs raise the cost of imports to protect domestic producers; taxes are charges on earnings or transactions; quotas limit the quantity that can be produced or imported.

Subsidies are payments from the government to producers designed to encourage production of a particular good. By providing extra funds or reducing production costs, subsidies boost a firm's profitability for that product, which tends to increase output and can shift the supply curve to the right. This helps make the good more available and can help keep prices at reasonable levels, especially for industries the government wants to support. That description—granting money to producers to encourage production—fits a subsidy. The other options describe different interventions: tariffs raise the cost of imports to protect domestic producers; taxes are charges on earnings or transactions; quotas limit the quantity that can be produced or imported.