Question

3)      Explain why the following statements are true or false:                                                       

A: Exporting a good reduces consumer surplus therefor overall economic welfare decreases.                                                            

   B: Importing a good reduces producer surplus therefore overall economic welfare decreases.                                                     

C: A tariff reduces imports, increases domestic production and producer surplus therefore overall economic surplus increases.     

   D: Export subsidies increase both consumer and producer surplus thereof they improve overall net economic welfare. 


Answer 1

Answer

Option D

Export subsidies increases supply shifting the supply curve to the right. This increases the equilibrium quantity of goods being bought and sold. Thus, both consumer surplus and producer surplus increases.

(Please consider giving an upvote if you find it useful)