In 2023, the government of Country X removed a subsidy on wheat production. Which diagram correctly shows the effect on the wheat market?

[Diagram options showing supply and demand curves with different shifts]

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Question

In 2023, the government of Country X removed a subsidy on wheat production. Which diagram correctly shows the effect on the wheat market?

[Diagram options showing supply and demand curves with different shifts]

Accepted Answer

Supply curve shifts left; equilibrium price rises; equilibrium quantity falls — Award 1 mark for identifying that removing a subsidy increases production costs, shifting the supply curve to the left. This results in a higher equilibrium price and lower equilibrium quantity. B is incorrect because removing a subsidy reduces supply, not increases it. C is incorrect because subsidies affect supply, not demand. D is incorrect because the demand curve is not directly affected by producer subsidies.

Answer

Supply curve shifts left; equilibrium price rises; equilibrium quantity falls

Answer

Demand curve shifts left; equilibrium price falls; equilibrium quantity falls

Answer

Demand curve shifts right; equilibrium price rises; equilibrium quantity rises

Answer

Supply curve shifts right; equilibrium price falls; equilibrium quantity rises

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