Compared with an export subsidy, 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 makes goods cheaper for domestic producers, thus increasing production and exports. However, unlike an export subsidy which directly lowers the cost of exporting, a production subsidy does not have the same direct impact on reducing the price of the product in the global market. Therefore, the increase in exports is likely to be less than with an export subsidy.

Compared with an Export Subsidy, for a Small Nation, a