In the case of a technology spillover, internalizing a positive externality through a government subsidy will cause the industry's supply curve to
A)shift up by an amount equal to the subsidy.
B)shift down by an amount less than the subsidy.
C)shift down by an amount equal to the subsidy.
D)shift down by an amount greater than the subsidy.

Question

Quizplus · Accepted Answer

The government subsidy will reduce the cost of production for the industry, which will cause the supply curve to shift downwards. The subsidy amount will be reflected in the lower cost of production, resulting in a shift of the supply curve by the same amount as the subsidy. Therefore, the correct answer is C.

In the Case of a Technology Spillover, Internalizing a Positive