Suppose that the world price of sugar is $100 per ton.If a
Smallcountry exporter gives its sugar exporters a subsidy
Of $50 per ton, then the country will:
A)suffer deadweight production and consumption losses.
B)enjoy deadweight production and consumption gains.
C)suffer deadweight production losses only.
D)suffer deadweight consumption losses only.

Question

Suppose that the world price of sugar is $100 per ton.If a
Small­country exporter gives its sugar exporters a subsidy
Of $50 per ton, then the country will:
A)suffer deadweight production and consumption losses.
B)enjoy deadweight production and consumption gains.
C)suffer deadweight production losses only.
D)suffer deadweight consumption losses only.

Quizplus · Accepted Answer

A subsidy to exporters will lead to overproduction and overconsumption relative to the efficient market outcome, resulting in deadweight losses in both production and consumption.

Suppose That the World Price of Sugar Is $100 Per