A subsidy granted to import-competing producers reduces overall domestic welfare by the same amount as would a tariff or quota that restricts imports by the same amount.

Question

Quizplus · Accepted Answer

A subsidy to import-competing producers does not create the same deadweight loss as a tariff or quota because it does not raise domestic prices for consumers, although it does involve a cost to taxpayers.

A Subsidy Granted to Import-Competing Producers Reduces Overall Domestic Welfare