For a small nation, a production subsidy increases exports by:
A) the same amount as an export subsidy.
B) less than with an export subsidy.
C) more than with an export subsidy.
D) undercutting world price.

Question

Quizplus · Accepted Answer

A production subsidy will increase production, which will in turn increase exports. However, it will not be as effective in increasing exports as an export subsidy because it does not directly lower the price for foreign consumers. Therefore, the increase in exports will be less than with an export subsidy.

For a Small Nation, a Production Subsidy Increases Exports By