Government subsidy lowers bus production costs to cut pollution

Steps:

• Identify the policy: financial assistance to bus companies to reduce air pollution.
• Analyze the effect: lowers production costs, enabling cheaper passenger prices.
• Link to economic tools: assistance that shifts supply curve rightward by reducing costs.
• Match to options: this describes a subsidy, not price controls or rules.

Why C is correct:

• A subsidy is government financial aid to producers, directly lowering marginal costs and encouraging output, as per standard microeconomic definitions.

Why the others are wrong:

• A: Maximum price caps consumer prices directly, without aiding producers' costs.
• B: Minimum price sets a floor to support producers, but raises prices, not lowers them.
• D: Regulation imposes standards or limits, like emission rules, not financial support.

Final answer: C