If a government decides to implement a per unit subsidy for a specific industry, how is this likely to affect the short-run production decisions of firms in that industry?

When a government gives a per unit subsidy to a specific industry, it means that the government will pay a certain amount for each unit of product that the firms in that industry produce. This extra money makes it cheaper for firms to produce their goods, which can encourage them to produce more in the short run. For example, if a dairy farm receives a subsidy of $2 for every gallon of milk produced, the farm can lower its prices or increase its profits, leading to more milk being produced. As a result, firms may hire more workers or buy more materials to take advantage of the subsidy. Overall, the subsidy can lead to increased production and potentially lower prices for consumers in the short term.