If the government stops subsidy on cocoa production, the supply curve of cocoa will

Step 1: Analyze the question The question asks what happens to the supply curve of cocoa when the government removes (stops) a subsidy on cocoa production.

Step 2: Explain the concept A subsidy is a payment from the government to producers that reduces their cost of production. Because costs are lower, producers can supply more at every price, so the supply curve shifts to the right.

If the subsidy is removed, the reverse happens:

• Production costs rise.
• Producers supply less cocoa at every price level.
• The supply curve shifts to the left (a decrease in supply).

Step 3: Work through it

1. Before: Subsidy exists → lower cost → supply curve at S₁.
2. Government stops the subsidy → cost of production rises.
3. At each price, fewer tons of cocoa are offered for sale.
4. The whole curve moves leftward, from S₁ to S₂.

Checking the options:

• A. Vertical: this describes perfectly inelastic supply, which is not caused by removing a subsidy.
• B. Unchanged: wrong, because a change in production cost is a determinant of supply and shifts the curve.
• C. Shift to the left: correct, since supply decreases.
• D. Shift to the right: this would happen if a subsidy were introduced or increased.

Step 4: Answer The correct option is C. shift to the left.

Tip: Think "Subsidy = Supply goes right; Subsidy removed = Supply goes left." Taxes work the opposite way: a tax raises costs and shifts supply left, and removing a tax shifts it right. Also remember that a change in price causes a movement along the curve, while a change in cost, technology, taxes, or subsidies causes a shift of the curve.