Would a producer prefer a general subsidy to both factors of production over a subsidy, involving equal cost to the government, to one factor of production only? Explain your answer. (b) Discuss why a government might decide to use a subsidy to one factor of production only.
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This is because a subsidy to both factors would lower the cost of production overall, allowing the producer to either increase production or reduce prices, both of which could potentially increase profits. A subsidy to just one factor of production would only Show more…
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