Which of the following observations pertaining to government subsidies is incorrect? A. They must be paid for, typically by taxing individuals and corporations B. They mainly benefit domestic producers, whose international competitiveness is increased C. Whether they generate national benefits that exceed their national costs is debatable D. They help foreign producers gain a competitive advantage over domestic producers

The correct answer is letter "D": They help foreign producers gain a competitive advantage over domestic producers.

Explanation:

A subsidy is a benefit granted to an individual, a business or an institution, typically by the government. Subsidies are provided to promote a social good or economic policy. Generally, the government provides subsidies in the form of cash or tax breaks. Other forms of government subsidies include low-rate loans and rebates.

When subsidies are provided to businesses, the objective is to boost their competitive advantage over foreign competitors and not the other way around.

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