Question

1. If the government decides to subsidize the production of a good, the result would be a decrease in the equilibrium price and a decrease in the equilibrium quantity. true or false

Answer 1

Answer: False

Explanation:

When the government subsidies production of a good, it leads to a rise in the supply of the good. The supply curve shifts down to the right leading to a fall in the price level. But the equilibrium quantity increases.

Thus, the given statement is false that if the government decides to subsidize the production of a good, the result would be a decrease in the equilibrium price and a decrease in the equilibrium quantity.