Question

Which of the following is false about subsidies? One of the largest beneficiaries of subsidies in most countries is Agriculture. They are government payments to domestic producers. Subsidies can hurt domestic producers by decreasing competition against foreign imports. Subsidies can take forms such as cash grants, loans, and government equity participation.

Answer 1

Answer: Subsidies can hurt domestic producers by decreasing competition against foreign imports.

Explanation:

Subsidies are the financial aid given by the government to local producers in order to reduce the price of goods and services and increase the amount of output produced. Subsidies can be in the form of loan, government equity and cash grants.

One sector which benefits most from subsidy is the agricultural sector. Subsidies are provided to the agricultural sector in order to increase food production in a country. Subsidies are also vital in order to increase competition against foreign imports.

Answer 2

Answer:

The correct answer is letter "C": Subsidies can hurt domestic producers by decreasing competition against foreign imports.

Explanation:

A Subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or economic policy. The government usually provides subsidies in the form of cash or tax breaks. Other forms of government subsidies are low rate loans and some types of rebates.

Subsidies aim to boost domestic production in front of foreign competition in the market.