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 domestic consumption of sugar will:
A) fall.
B) rise.
C) remain unchanged.
D) first fall, then rise.

Question

Quizplus · Accepted Answer

When a country subsidizes its sugar exporters, the domestic price of sugar is likely to increase as producers prefer exporting to benefit from the subsidy. This makes sugar more expensive for domestic consumers, leading to a decrease in domestic consumption.

Suppose That the World Price of Sugar Is $100 Per