Concept:A production subsidy reduces producers' costs, so it affects the supply side of the market, not the demand side.
Explanation:When the government increases production subsidies, producers receive extra financial support for every unit they produce.
This lowers the effective cost of production for producers.
At each existing market price, producers become willing and able to supply a larger quantity of the good.
As a result, the entire supply curve shifts to the right.
The demand curve does not shift because consumer income, tastes, and preferences remain unchanged.
Hence, an increase in production subsidies causes only the supply curve to move rightward.
Answer:B. the supply curve to the right.