A subsidy granted to import-competing producers is often preferred to an import tariff on the grounds that it results in a smaller deadweight welfare loss and allows consumption to remain unchanged.

Question

Quizplus · Accepted Answer

A subsidy granted to import-competing producers can result in a smaller deadweight welfare loss compared to an import tariff because it supports domestic production, which may lead to lower prices and increased output. Import tariffs, on the other hand, can lead to higher prices for consumers and may not necessarily support domestic production. However, the impact on consumption may depend on the specifics of the subsidy or tariff policy.

A Subsidy Granted to Import-Competing Producers Is Often Preferred to an Import