Subsidies Shift Supply Curve Rightward

Steps:

• Subsidies for new machinery reduce firms' production costs.
• Lower costs increase quantity supplied at each price, shifting supply curve right.
• Demand curve remains unchanged.
• New equilibrium occurs at intersection of original demand and new supply, with lower price and higher quantity.

Why D is correct:

• D represents the point of lower equilibrium price and higher quantity, per the law of supply stating subsidies expand output.

Why the others are wrong:

• A: Shows higher price, which would require leftward supply shift, not subsidies.
• B: Indicates same quantity, ignoring supply increase from cost reduction.
• C: Depicts lower quantity, opposite of subsidy effect on production.

Final answer: D