Discussion Post: Microeconomics
Based on your chapter readings, share your understanding of the following:
Consider a small country that exports steel. Suppose that a "pro-trade" government decides to subsidize the export of steel by paying a certain amount for each ton sold abroad.
• How does this export subsidy affect the
o domestic price of steel,
o the quantity of steel produced,
o the quantity of steel consumed, and
o the quantity of steel exported?
• How does it affect
o consumer surplus,
o producer surplus,
o government revenue, and
o total surplus?
• Is it a good policy from the standpoint of economic efficiency? (Hint: the analysis of an export subsidy is similar to the analysis of a tariff)
The response should include a reference list. Using double-space, Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.