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Question
What will be the effect of raising production subsidies on the supply of a commodity?
Options
Downward movement along with the supply curve.
Leftward shift of supply curve.
Rightward shift of supply curve.
Upward movement along the supply curve.
Solution
Rightward shift of supply curve.
Explanation:
Raising production subsidies reduces the cost of production for suppliers, which encourages them to produce and supply more of the commodity at the same price levels. A rightward shift of the supply curve represents this increase in supply.
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