Consider a small country that exports steel.Suppose that a pro-trade governmentdecides
Chapter 9, Problem 14(choose chapter or problem)
Consider a small country that exports steel.Suppose that a pro-trade governmentdecides to subsidize the export of steel bypaying a certain amount for each ton soldabroad. How does this export subsidy affectthe domestic price of steel, the quantityof steel produced, the quantity of steelconsumed, and the quantity of steel exported?How does it affect consumer surplus,producer surplus, government revenue, andtotal surplus? Is it a good policy from thestandpoint of economic efficiency? (Hint: Theanalysis of an export subsidy is similar to theanalysis of a tariff.)
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