NO.PZ2023071902000076
问题如下：
QuestionFor a normal good manufactured in a small nation, what can be the likely impact of instituting an export subsidy?
选项：
A.domestic consumption of the good.
B.price of the good in the domestic market.
C.national welfare of the country providing the subsidy.
解释：
Solution
Incorrect, due to the reason that with the initiation of an export subsidy, the seller is urged to divert sales from the domestic front to international markets. This redirection results in a price increase in the domestic sphere by the subsidy amount in situations concerning a less-populated country (price before subsidy plus subsidy). As the price rises in the less-populated country's domestic market, the demand for the commodity tends to decrease (instead of increase).
Correct, in the context of an export subsidy, sellers are incentivized to redirect sales from the home market to the international market because the international price plus a per-unit subsidy is received for every unit of the good exported. This situation prompts a rise in the domestic market price by the subsidy amount in the less-populated country scenario (price before subsidy plus subsidy).
Incorrect, as an export subsidy, essentially a financial benefit given by the government to a firm for every unit of a good exported, aims at stimulating export activities. However, it impedes the smooth operation of the free market and might shift trade away from its natural comparative advantage, thereby decreasing welfare. The overall welfare effect is negative, in both more-populated and less-populated country scenarios. Hence, export subsidies tend to reduce rather than increase total societal benefit.
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