Suppose that the world price of sugar is $100 per ton. If a small-country exporter gives its sugar exporters a subsidy of $50 per ton, then the country will:
A) suffer deadweight production and consumption losses.
B) enjoy deadweight production and consumption gains.
C) suffer deadweight production losses only.
D) suffer deadweight consumption losses only.

Question

Quizplus · Accepted Answer

Subsidies lead to overproduction relative to the efficient market outcome, causing deadweight production losses. They also distort market prices, leading to inefficient consumption choices and deadweight consumption losses.

Suppose That the World Price of Sugar Is $100 Per