3.5 Market Effects of Changes in Supply
Figure 3.4
-Figure 3.4 illustrates the supply of tacos. If the government offered a subsidy to Mexican restaurants for each taco they produce, this would most likely cause a movement from

Question

3.5 Market Effects of Changes in Supply
  Figure 3.4
-Figure 3.4 illustrates the supply of tacos. If the government offered a subsidy to Mexican restaurants for each taco they produce, this would most likely cause a movement from

Quizplus · Accepted Answer

A subsidy is a government payment to a producer to encourage production of a particular good or service. In this case, the subsidy would encourage Mexican restaurants to produce more tacos, which would shift the supply curve to the right, from S₀ to S₁. Therefore, the correct choice is D, S₀ to S₁.