Domestic import-competing producers

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“While the imposition by a country’s government of an import tariff on a good clearly injures the country’s domestic consumers of the good, the tariff helps domestic import-competing producers and enhances overall country welfare (i.e., the “net welfare effect” is positive). Similarly, the granting of an export subsidy by the country’s government to home producers of a good also injures home consumers of the good, but the subsidy helps home producers and enhances overall country welfare.” Utilizing traditional supply/demand analysis, illustrate and explain the parts of the above statement that are TRUE (if any) and the parts that are FALSE (if any). (You can use a “small-country” case throughout your answer. Also, assume that there are barriers to the import of the good into the country granting the export subsidy.)

Reference no: EM131169325

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