请教两个问题

问题如下：

Question

A small country has a comparative advantage in the production of pencils. The government establishes an export subsidy for pencils to promote economic growth. Which of the following will be the most likely result of this policy?

选项：

A.Although domestic producers will receive a net benefit, the policy will give rise to inefficiencies that cause a deadweight loss to the national welfare. B.As new domestic producers enter the pencils market, supply will increase and domestic prices will decline. C.The increase in the domestic producer surplus will exceed the sum of the subsidy and the decrease in the domestic consumer surplus.

解释：

Solution

A is correct. Export subsidies interfere with the functioning of the free market and result in a deadweight loss to society. The deadweight loss arises on the producer side because the higher subsidized price causes inefficient producers to remain in the market. On the consumer side, the higher price causes those that would have purchased at the lower price to be shut out of the market.

B is incorrect. Producers shift output from the domestic to the export market to capture the subsidy. Furthermore, as a small country, the domestic market is a price taker and thus consumers pay the international price plus the subsidy causing the domestic price to rise.

C is incorrect. As prices rise and producers increase production beyond the efficient level, efficiencies diminish. National welfare must decline, as the increase in producer surplus is less than the combined cost to consumer and government.