Governments sometimes subsidize domestic industries. When this occurs
A) the governments will not impose tariffs.
B) the subsidized sell less in international markets because it is more profitable to sell at home.
C) the subsidized industries have an advantage on international markets relative to non-subsidized firms. For this reason, other countries often impose tariffs on the subsidized imports.
D) the subsidized industries have an advantage on international markets relative to nonsubsidized firms. However, this is not an argument for imposing tariffs and tariffs would violate international agreements.

Question

Quizplus · Accepted Answer

When a domestic industry is subsidized, it becomes more competitive and can sell products at a lower price than non-subsidized firms. This can give them an advantage in international markets and cause other countries to impose tariffs on the subsidized imports to protect their domestic industries. Therefore, choice C is the correct answer. Choice A is incorrect because the government may still impose tariffs even if they subsidize domestic industries. Choice B is partly correct because subsidized firms may prioritize selling domestically due to increased profitability, but it doesn't fully answer the question. Choice D is incorrect because while subsidies may not be an argument for imposing tariffs, it is still a possibility that other countries may impose tariffs.

Governments Sometimes Subsidize Domestic Industries. When This Occurs