Scenario: Montesia is predominantly a producer and exporter of manufactured goods. However, it imports several agricultural products.
-Refer to the scenario above.Recently,the government of Montesia provided an export subsidy for some cash crops.Which of the following is likely to occur in this case?

Question

Quizplus · Accepted Answer

When the government provides an export subsidy for cash crops, the domestic producers of these crops will be better off as they will receive higher prices for their products. This is because the subsidy will lower the production costs, allowing producers to sell their goods at a lower price, yet still making a profit. As a result, they will be able to increase their production and exports of cash crops. However, the government's revenue may decrease as it is providing a subsidy, and it is unlikely that the volume of exports of cash crops will decrease. Domestic consumers of cash crops may or may not be worse off, as it depends on whether the producers pass on the subsidy to consumers or not.

Scenario: Montesia Is Predominantly a Producer and Exporter of Manufactured