Final answer:
A subsidy to a firm shifts its supply curve downward (or to the right) indicating that the firm can supply more goods at every price level, potentially lowering market prices and affecting foreign competitors.
Step-by-step explanation:
A subsidy to a firm is akin to a reduction in the costs of production. Such financial assistance from the government results in an increase in the firm's profits, incentivizing it to produce a larger quantity of goods at every price level. Reflecting this change in economic behavior, the firm's supply curve will shift downward (or to the right), which means that for any given price, the firm is willing and able to supply more of the good. This shift can lead to a decrease in the market price of the good, making it more competitive compared to similar goods produced by foreign producers without the subsidy. A substantial subsidy could lower the price to the extent that it falls below the cost of production faced by foreign producers, potentially driving them out of the market due to non-profitable sales.