Suppose that the world price of sugar is $100 per ton. If a large 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 tends to increase because producers are incentivized to export more sugar, reducing the supply available domestically. As the domestic price rises, consumers are likely to buy less sugar, leading to a fall in domestic consumption.

Suppose That the World Price of Sugar Is $100 Per