Subsidies lower effective production costs

Steps:

• Identify subsidy as payment to producers, reducing their per-unit cost by $50.
• Recognize this shifts supply curve rightward, increasing quantity supplied at each price.
• Determine impact: lower costs encourage more production without changing consumer prices directly.
• Conclude main effect is on producers' total costs, not market equilibrium or prices.

Why C is correct:

• Subsidies directly reduce marginal and total production costs by the subsidy amount, per economic definition of producer subsidies.

Why the others are wrong:

• A: Subsidies shift supply but do not guarantee equilibrium; markets adjust dynamically.
• B: Subsidies lower prices, not maintain high ones, due to increased supply.
• D: Output increases, not stabilizes, as costs fall and production rises.

Final answer: C