If the government provides a subsidy to producers,what is the effect of this policy in a supply and demand diagram?
A) The demand curve shifts leftward and the price rises.
B) The supply curve shifts rightward and the price falls.
C) The supply curve shifts leftward and the price falls.
D) The supply curve shifts leftward and the price rises.
E) The demand curve shifts rightward and the price rises.

Question

Quizplus · Accepted Answer

A subsidy lowers the cost of production for producers, so they are willing and able to supply more at each price level. This is represented by a shift to the right of the supply curve. As a result, the equilibrium quantity increases while the equilibrium price falls.

If the Government Provides a Subsidy to Producers,what Is the Effect