How do subsidies generally affect businesses receiving them?

Subsidies generally affect businesses by decreasing operational costs, which is why this choice is correct. When a business receives a subsidy, it receives financial support from the government that can take various forms, such as grants, tax breaks, or direct payments. This financial assistance helps lower the overall costs of production, allowing businesses to operate more efficiently. With reduced costs, companies can either increase their profit margins or pass on some savings to consumers through lower prices, making them more competitive in the market.

Other options do not accurately represent the typical effects of subsidies. Higher taxes would generally increase operational costs rather than decrease them. Creating market monopolies is not a direct effect of subsidies; instead, subsidies can encourage competition by helping smaller businesses enter the market. Lastly, subsidies are intended to reduce costs, so they typically do not lead to increased product pricing. Instead, they often have the opposite effect by enabling businesses to offer products at lower prices.