Correct Option: B

A subsidy is essentially a payment by the government to suppliers/producers that reduce their costs of production and encourages them to increase output. Examples include a guaranteed payment on the factor cost of a product – e.g. a guaranteed minimum price offered to farmers; an input subsidy which subsidizes the cost of inputs used in production, etc. However, subsidies can be given to consuming units as well. Either way, it benefits the end use or consumer.