Question

Which of the following points indicates the disadvantage of subsidy? 

Options

• It is generally argued that subsidy favours and benefits fertiliser industries than the farmers. 

• Subsidies are also enjoyed by the potential farmers who do not need them. 

• Subsidies, if provided at a much lower rate than the market rate may lead to the wastage of resources 

• All of the above

Answer 1

All of the above

Explanation:

The following are some counter-arguments to subsidies.

1. Subsidies, it is often assumed, favor and benefit fertiliser businesses over farmers. Subsidies provide a buffer against market circumstances, so these industries don't have to worry about market share or competition.
2. Potential farmers who do not require subsidies also benefit from them. This frequently results in the misallocation of scarce resources and waste.
3. Subsidies that are supplied at a considerably lower rate than the market rate may result in resource waste. Subsidized electricity, for example, results in energy waste.
4. There is widespread agreement that subsidies should be offered to test the benefit and viability of a certain technique, but that once the performance has been determined, subsidies should be discontinued.