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When a subsidy is introduced in a market, it lowers the cost of producing goods by the amount of the subsidy. In this case, a $4 subsidy shifts the supply curve downward, effectively increasing supply. This means that producers are now willing to supply more goods at a lower cost. To accurately measure the effect of the subsidy, each point on the supply curve is shifted downward by the amount of the subsidy, resulting in an increase in the quantity supplied.
