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Conclusion: Should repay if is able to repay. 

­(C) A subsidy should be understood as creating a debt that, though routinely forgiven, is rightly forgiven only if either the debtor is unable to repay it or the creditor is not interested in repayment.

Negated ­(C)
A subsidy should be understood as creating a debt that, though routinely forgiven, is rightly forgiven even if either the debtor is able to repay it or the creditor is interested in repayment. 
Negation in short:= Forgiven even if the artist is able to repay

Negated C breaks the conclusion.

 
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­If an artist receives a public subsidy to support work on a specific project - e.g., making a film - and if this project then proves successful enough to allow the artist to repay the subsidy, is the artist then morally obliged to do so? The answer is clearly yes, since the money returned to the agency distributing the subsidies will be welcome as a source of support for other artists deserving of public subsidies.

Which one of the following principles, if established, most helps to justify the conclusion in the passage?

(A) An artist has a moral duty to urge deserving fellow artists to try to obtain public subsidies, especially if those artists' projects promise to be financially successful. - WRONG. Irrelevant because it takes morality in other direction that is not related to passage.

(B) A financially successful artist should acknowledge that financial success is not solely a function of artistic merit. - WRONG. Even he/she acknowledge then it really does not affects the conclusion of why the artist is morally obliged.

(C) A subsidy should be understood as creating a debt that, though routinely forgiven, is rightly forgiven only if either the debtor is unable to repay it or the creditor is not interested in repayment. - CORRECT. Though POE helps, it suggests that inability of paying back is not morally wrong. If that is so, then conclusion about moral obligation stands to lose. 

(D) The provider of a subsidy should judge as most deserving of subsidies those whose projects are most likely to turn into financial successes. - WRONG. Concern is of artist and not the provider of subsidy. 
 
(E) An artist requesting a subsidy for a potentially profitable project should be required to make a reasonable effort to obtain a bank loan first. - WRONG. Irrelevant like B is.

Answser C.
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