If a large nation imposes a production subsidy, the
Production subsidy:
A)has more impact on world prices than an export subsidy.
B)increases exports by more than the export subsidy.
C)has no measurable effect on prices or exports for a large country.
D)changes world prices by less and increases exports by less than an export subsidy.

Question

Quizplus · Accepted Answer

A production subsidy would increase the supply of the subsidized product, leading to a decrease in the domestic price. However, since the nation is large, the impact on world prices would be reduced. As a result, the change in world prices and increase in exports would be less than an export subsidy.

If a Large Nation Imposes a Production Subsidy, the