Figure 5.1 illustrates the steel market for Mexico, assumed to be a "small" country that is unable to affect the world price. Suppose the world price of steel is given and constant at $200 per ton. Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1. Alternative Nontariff Trade Barriers Levied by a "Small" Country
-Consider Figure 5.1.Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as indicated by the supply schedule S_{M (with subsidy)}.The total cost of the subsidy to the Mexican government equals

Question

Figure 5.1 illustrates the steel market for Mexico, assumed to be a "small" country that is unable to affect the world price. Suppose the world price of steel is given and constant at $200 per ton. Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1. Alternative Nontariff Trade Barriers Levied by a "Small" Country

-Consider Figure 5.1.Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as indicated by the supply schedule S_{M (with subsidy)}.The total cost of the subsidy to the Mexican government equals

Quizplus · Accepted Answer

The total cost of the subsidy is calculated by multiplying the subsidy amount per ton ($200) by the quantity of steel produced with the subsidy. If the quantity produced is 4 tons, the total cost is $200 x 4 = $800.

Figure 51 Illustrates the Steel Market for Mexico, Assumed to Be