Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable to influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy
-Consider Figure 6.2.To help its firms further penetrate export markets, suppose the South Korean government provides them a production subsidy of $20 per calculator.With the subsidy, South Korean firms charge a price of $______________ and export ______________ calculators to Mexico.

Question

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable to influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy 
-Consider Figure 6.2.To help its firms further penetrate export markets, suppose the South Korean government provides them a production subsidy of $20 per calculator.With the subsidy, South Korean firms charge a price of $______________ and export ______________ calculators to Mexico.

Quizplus · Accepted Answer

With a production subsidy of $20 per calculator, South Korean firms can reduce their costs and therefore lower their selling price while still maintaining profitability. If the original price without the subsidy made South Korean calculators competitive in the international market, a $20 reduction in costs (and potentially in price) would make them even more competitive, increasing their market share and volume of exports. However, without specific data from Figure 6.2, we can't calculate the exact new price and export volume. The choice provided here assumes a hypothetical scenario where the subsidy allows South Korean firms to charge $40 and export 8 calculators to Mexico, indicating a situation where the subsidy improves competitiveness but doesn't necessarily double export volume or halve prices directly.

Figure 62 Illustrates the Calculator Market for Mexico, Assumed to Be