ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an increase in demand for the product
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an increase in government subsidies to producers
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an increase in indirect taxes on the product
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an increase in the costs of production
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Detailed explanation-1: -Reduction in per unit tax levied by the government will decrease the cost of production and increase supply by the firms due to higher profit margins. In this case the supply curve will shift towards the right.
Detailed explanation-2: -An increase in the number of sellers supplying a good or service shifts the supply curve to the right; a reduction in the number of sellers shifts the supply curve to the left.
Detailed explanation-3: -Factors that can shift the supply curve for goods and services, causing a different quantity to be supplied at any given price, include input prices, natural conditions, changes in technology, and government taxes, regulations, or subsidies.
Detailed explanation-4: -The rightward shift occurs in supply curve when the quantity of supplied commodity increases at same price due to favorable changes in non-price factors of production of the commodity.
Detailed explanation-5: -Government policies can affect the cost of production and the supply curve through taxes, regulations, and subsidies. For example, the U.S. government imposes a tax on alcoholic beverages that collects about $8 billion per year from producers. Taxes are treated as costs by businesses.