A subsidy on exports increases the supply of exports, which can lead to lower prices for consumers and greater competitiveness in the exporting country. However, it can also lead to an oversupply of the subsidized product and potentially harm domestic industries in other countries.

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A Subsidy on Exports

Question 208

Multiple Choice

A subsidy on exports

A) is less harmful than a tariff.
B) increases the demand for imports.
C) lowers consumer prices and so should be encouraged.
D) increases the supply of exports.
E) imposes no cost on the importing country.

Correct Answer: