Which of the following describes the impact of an increase in subsidies on supply?

An increase in subsidies typically decreases the costs of production for suppliers. When producers receive financial assistance in the form of subsidies, their cost per unit of output drops. As a result, they are able to produce more goods at a lower expense, which incentivizes them to increase their output. Consequently, this leads to a rightward shift in the supply curve, indicating an increase in supply in the market.

Understanding the dynamics of subsidies helps clarify why this is the correct answer. The impact of subsidies is generally a positive one for producers, as they can enhance their profitability and capacity to supply more products without raising prices for consumers, ultimately stimulating the market.