Problem
Suppose that one country subsidizes its exports and the other country imposes a "countervailing" tariff that offsets its effect, so that in the end relative prices in the sec-ond country are unchanged. What happens to the terms of trade? What about welfare in the two countries? Suppose, on the other hand, that the second country retaliates with an expon sub-sidy of its own. Contrast the result.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.