Question

why do subsidies increase supply? 1 point
a) they increase the cost of production
b) they reduce the cost of production for firms
c) they decrease demand for the product
d) they limit the number of sellers

if the cost of labor increases due to a minimum - wage increase, what happens to supply? 1 point
a) supply increases
b) supply decreases
c) supply remains unchanged
d) supply becomes perfectly elastic

Explanation:

Subsidies are payments or benefits given to producers by the government. They reduce the cost of production for firms, allowing them to produce more at each price level, thus increasing supply. When the cost of labor (a key production - input) increases due to a minimum - wage increase, the cost of production for firms rises. Higher production costs lead to a decrease in supply as firms are less willing or able to produce at each price level.

Answer:

1. B. They reduce the cost of production for firms
2. B. Supply decreases