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July 29, 2015

Homework Help: Econ MC

Posted by Econ on Tuesday, April 17, 2007 at 10:33pm.

Internalizing a positive externality through a government subsidy will cause the industry's supply
curve to
a. remain unchanged.
b. shift down by an amount less than the subsidy.
c. shift down by anamount equal to the subsidy.
d. shift down by an amount greater than the subsidy.

I believe the answer is a)? the supply curve won't change, only demand will change, am i correct?

No. I think the supply curve shifts by the amount of the subsidy.

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