In the event of increased government subsidies, the farmer's production cost

In the event of increased government subsidies, the farmer's production cost

Answer Details

When there is an increase in government subsidies, farmers can produce their goods at a lower cost because the government is providing financial assistance to help offset some of the expenses incurred in production. This reduction in production costs leads to an increase in the supply of goods produced by farmers, since they can now produce more for the same cost. Therefore, the correct answer is: "falls, hence supply increases".