Reference no: EM13797049
Refer to the figure below answer the following questions. The country in this example is a large exporting country. Initially, the country exports motorbikes at the world price of $96. Motorbike producers lobby heavily and receive an export subsidy. After subsidy, the new world price becomes $90 per bike and domestic consumers purchase only 6 million motorbikes.
What is the size of the export subsidy? $_______
What is the domestic price per bike after subsidy? $ .
What is the change in export that results from the export subsidy? $_______
What is the cost of the export subsidy to the government? $_______
Which areas (in the domestic market panel) represent the loss due to the decline in international terms of trade? _______
What is the amount of the loss in world welfare resulting from the export subsidy? $_______
If this country were too small to affect world price, what would be the world price after subsidy?
If this country were too small to affect world price, what would be the domestic price after subsidy?
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