Consider a small country that exports steel. Suppose that a "pro-trade" government decides to subsidize the export of steel by paying a certain amount for each ton sold abroad. 1. How does this export subsidy affect the 1. domestic price of steel, 2. the quantity of steel produced, 3. the quantity of steel consumed, and 4. the quantity of steel exported? 2. How does it affect 1. consumer surplus, 2. producer surplus, 3. government revenue, and 4. total surplus? 3. Is it a good policy from the standpoint of economic efficiency? (Hint: the analysis of an export subsidy is similar to the analysis of a tariff)
Consider a small country that exports steel. Suppose that a "pro-trade" government decides to subsidize the export of steel by paying a certain amount for each ton sold abroad. 1. How does this export subsidy affect the 1. domestic price of steel, 2. the quantity of steel produced, 3. the quantity of steel consumed, and 4. the quantity of steel exported? 2. How does it affect 1. consumer surplus, 2. producer surplus, 3. government revenue, and 4. total surplus? 3. Is it a good policy from the standpoint of economic efficiency? (Hint: the analysis of an export subsidy is similar to the analysis of a tariff)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 7PA
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![Consider a small country that exports steel. Suppose
that a "pro-trade" government decides to subsidize the
export of steel by paying a certain amount for each ton
sold abroad.
1. How does this export subsidy affect the
1. domestic price of steel,
2. the quantity of steel produced,
3. the quantity of steel consumed, and
4. the quantity of steel exported?
2. How does it affect
1. consumer surplus,
2. producer surplus,
3. government revenue, and
4. total surplus?
3. Is it a good policy from the standpoint of economic
efficiency? (Hint: the analysis of an export subsidy is
similar to the analysis of a tariff)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fddcd67c5-f5e5-4eef-bf15-9a180f678d40%2Fd1e43084-1e24-45de-9c29-9f7accf2a65f%2Fwxspx1s_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a small country that exports steel. Suppose
that a "pro-trade" government decides to subsidize the
export of steel by paying a certain amount for each ton
sold abroad.
1. How does this export subsidy affect the
1. domestic price of steel,
2. the quantity of steel produced,
3. the quantity of steel consumed, and
4. the quantity of steel exported?
2. How does it affect
1. consumer surplus,
2. producer surplus,
3. government revenue, and
4. total surplus?
3. Is it a good policy from the standpoint of economic
efficiency? (Hint: the analysis of an export subsidy is
similar to the analysis of a tariff)
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