How do government subsidies typically affect market equilibrium and producer surplus in a competitive market?

Government subsidies are financial support given by the government to help lower the costs for producers. When a subsidy is introduced in a competitive market, it usually leads to a decrease in production costs for businesses. This encourages producers to make more goods, which increases the supply in the market. As supply increases, the market equilibrium price tends to decrease, allowing consumers to buy products at lower prices. For example, if the government gives a subsidy to farmers growing wheat, they can produce more wheat at a lower price, which raises the producer surplus because they can sell more wheat and earn more money overall.