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.

You are correct in thinking that the externalities, both positive and negative, typically affect the demand curve. However, in the case of a positive externality, such as when the government subsidizes an industry to internalize it, it can also affect the supply curve.

When the government provides a subsidy, it essentially lowers the costs for producers in the industry. This leads to an increase in the supply of goods and services, as producers are incentivized to produce more at a lower cost. As a result, the supply curve shifts downwards, or to the right, by an amount equal to the subsidy.

Therefore, the correct answer to the question is c) the supply curve shifts down by an amount equal to the subsidy. This reflects the increased output and lower costs for producers due to the government subsidy.