Suppose that the world price of sugar is $100 per ton. If a small country gives its sugar exporters a subsidy of $50 per ton, then the world price of sugar will:
A) rise to $150 per ton.
B) fall to $50 per ton.
C) remain at $100 per ton.
D) first rise to $150 per ton, then fall to $100 per ton.

Question

Quizplus · Accepted Answer

The subsidy affects only the domestic price of sugar, not the world price. Therefore, the world price will remain at $100 per ton.

Suppose That the World Price of Sugar Is $100 Per