Multiple Choice
In a competitive market, the point at which quantity supplied equals quantity demanded is called the:
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3. The Market Forces of Supply and Demand
Market Equilibrium
Multiple Choice
What happens in the market for corn if the government decides to subsidize farmers?
A
Demand shifts to the left
B
Demand shifts to the right
C
Supply shifts to the left
D
Supply shifts to the right
Verified step by step guidance1
Understand the concept of a subsidy: A subsidy is a financial assistance provided by the government to producers, which lowers their production costs and encourages them to produce more.
Identify the effect of a subsidy on supply: When the government provides a subsidy to farmers, it effectively reduces their cost of production, making it cheaper to produce each unit of corn.
Analyze the supply curve: A reduction in production costs due to a subsidy will cause the supply curve to shift to the right, indicating an increase in supply at every price level.
Consider the demand curve: A subsidy directly affects the supply side of the market, not the demand side. Therefore, the demand curve remains unchanged.
Conclude the market effect: With the supply curve shifting to the right, there will be an increase in the quantity of corn supplied in the market, potentially leading to a lower equilibrium price if demand remains constant.
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