Question

Suppose the government provides a subsidy for ethanol production, an energy source made from corn, what happens to the supply of ethanol? *

2 points
a. Quantity supplied increases
b. Quantity supplied decreases
c. Supply increases
d. Supply decreases

Answer 1

The correct answer is - supply increases.

Step-by-step explanation:

If the government subsidies any product, corn ethanol here, the producers can increase their production for more goods or services. This increase in the production leads to an increase in the supply of particular good or service.

An increase in the supply will also lead to increase in the quantity demand and that ultimately lead to a decrease in the price of the service or good. In this case, corn ethanol will also experience an increase in supply.