Question

Losses and business failures a. illustrate why government subsidies are necessary if resources are going to be allocated efficiently. b. will help redirect resources away from unproductive projects. c. reflect that buyers value the product highly relative to costs. d. indicate that sellers are producing the commodity at the lowest possible cost.

Answer 1

b. will help redirect resources away from unproductive projects

Step-by-step explanation:

When a project return are lower, it is destroying capital as the return are lower than the cost to generate the capital.

Therefore, when the business stop generating income or it does losses or lower returns than the cost of capital either case, it will stop funding.

The investor will stop funding that unproductive projects and move to better projects and business which yields a gain.