Question 7 • * HSA 26-27 US Government
A subsidy is financial support that lowers producers’ costs or boosts their income, encouraging them to produce more. A subsidy on domestic oranges directly benefits domestic producers. A tariff on cars or clothes may protect domestic producers from foreign competition, but it is not a direct positive incentive to produce a particular domestic good; a subsidy on imported cars benefits importers or foreign producers instead.
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