What is a subsidy?

A subsidy is best defined in the context as financial assistance provided by the government to support an industry or business, allowing them to maintain lower prices for their goods or services. This type of monetary support can help stabilize certain markets, promote economic activity, or protect jobs by making it more economically viable for businesses to operate in sectors that might otherwise struggle due to competition or high production costs.

Subsidies can take various forms, such as direct cash payments, low-interest loans, or tax breaks. By keeping prices low, subsidies can also indirectly benefit consumers, making goods and services more affordable while encouraging spending in the economy. This enhances the competitive ability of businesses, facilitating growth and employment within specific sectors deemed important by policymakers.

While other options reference financial support for businesses, they do not encompass the specific role of a subsidy as a government intervention aimed at lowering costs to support economic objectives. Money from investors pertains to investment in business with the expectation of returns, tax incentives for startups focus on new business encouragement through tax relief rather than direct financial assistance, and funding for research and development is a distinct category aimed at innovation rather than direct price support. Thus, option B accurately captures the essence of what a subsidy entails.