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What effect is possible for a company when a government subsidy is removed?

Answer and explanation

Correct answer: Cost may increase

The governing concept is the political environment of business, which includes government policies, fiscal measures, subsidies, taxes, and regulations that influence business decisions. A subsidy lowers the effective cost of production or operation by providing financial support. If the government removes it, the company may have to bear expenses that were previously covered or reduced, so its operating or production cost can increase. Therefore, option A is correct. The word “may” is important because the actual effect depends on the product, market, and company response. Options B, C, and D are not logical consequences of subsidy withdrawal: customer numbers are not guaranteed to rise, weather is unrelated, and machinery does not become new automatically.

Related tags

Business-EnvironmentPolitical-EnvironmentGovernment-SubsidyClass-12Political EnvironmentBusiness EnvironmentBusiness StudiesClass 12 Mcq

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