The various International Trade theories inform us...

The various International Trade theories inform us that: Firms that disperse their activities to other countries, end up being inefficient Firms that establish a first-mover advantage in a new product have a chance to dominate global trade in that product Tariffs on heavy industry products such as steel benefit consumers by lowering the prices of steel because only domestic steel is sold None of the above

Transcript

00:02 So let's talk about this question.

00:04 So an export subsidy is when the government gives the suppliers incentive to export more.

00:32 This raises the domestic price.

00:34 In a large country, it reduces the foreign price.

00:37 So let's go over why.

00:39 So in the domestic market, if they incentivize exports, the price will go up.

00:51 So if we think about it, they're incentivizing exports.

00:57 Exports and so therefore suppliers are more likely to create more exports rather than supply domestically so then our supply is going to shift to the left and then our price will go up so then for the large country we're looking at the foreign market here the price is going to go down so how we think about it is it incentivizes more exports so the supply of exports is going to shift to the right so it makes sense that our price is going to go down so for the first part it should be the foreign price of steel rather than domestic price for the domestic it does the opposite for steel production quantity so it says that the subsidy encourages higher steel production so if it's a subsidy on the exports it would not do this but if it's a subsidy on on just the steel itself, then it would make sense that that would occur.

02:32 So with the subsidy, it becomes cheaper to supply.

02:36 Then the supply shifts to the right.

02:38 Then you could see that our price is going to go down.

02:44 And the quantity does go up...

Question

Please give Ace some feedback