From the list below, the best definition of the word 'subsidy' is

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Question: From the list below, the best definition of the word 'subsidy' is

Option a: 'a product that can be used as an alternative to another product' — This describes a substitute product rather than a subsidy. It talks about competition between products, not about financial support from the government, so this definition misconstrues the term.

Option b: 'the value of the next best alternative lost when making a decision' — This is the concept of opportunity cost. It is a key idea in economics but not related to subsidies, which involve government financial support rather than the cost of foregone alternatives.

Option c: 'a payment provided by the government to a person or a firm, in order to encourage a particular behaviour' — This matches the standard definition of a subsidy: a government payment aimed at influencing behavior or activity in a desired direction, such as supporting farmers, renewable energy, or research activity. It directly captures the essence of subsidies.

Option d: 'a levy imposed by the government on a person or a firm, in order to discourage a particular behaviour' — This describes a tax or a tax-like penalty, not a subsidy. Taxes are charges to discourage behavior, whereas subsidies are positive payments to encourage behavior.

In summary, the third option aligns with the conventional economic definition of a subsidy as a government payment intended to spur a specified action or industry, while the other options refer to related but distinct concepts (substitutes, opportunity cost) or to taxes rather than subsidies.

MUF0061 Economics Unit 1 - Semester 2, 2025 Revision Quiz: Taxes and Subsidies (5 - 10 minutes)

From the list below, the best definition of the word 'subsidy' is

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