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Exam 10: Export Subsidies in Agriculture and High-Technology Industries

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Question 21

Multiple Choice

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Why do countries subsidize exports when they suffer net welfare losses from these subsidies?

A) Exporters receiving the subsidy engage in rent-seeking activities.
B) Exports generate positive externalities.
C) Exports provide foreign currency.
D) Exports provide jobs.

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Question 22

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(Scenario: Demand and Supply for Iron Ore) This table represents a demand and supply schedule for a small-country producer of iron ore. It sells output in its home market and on the world market at the world price of $70 per ton. Table: Demand and Supply for Iron Ore What is the total value of the export subsidy that exporters receive?

A) $500
B) $800
C) $400
D) $100

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Question 23

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(Scenario: Freedonian Exports) In the small country of Freedonia, the domestic demand for widgets is represented by P = 100 - 3Q; the domestic supply of widgets is represented by P = 1Q. What is the value of total subsidy payments to Freedonia's widget exporters?

(Figure: Home's Exporting Industry I) The graph shows information about a small home exporter. D is home demand and S is home supply. According to the graph, the deadweight loss from the $50 export subsidy is:

(Figure: Payoff Matrix for Airbus and Boeing) Which of the following options is a Nash equilibrium in the payoff matrix in the figure below?

The largest passenger jet ever developed is the:

Suppose that a large country decides to cut its agricultural export subsidies by 50%. Will the country gain or lose?

In a small country, an export tariff will result in:

Are domestic consumers better or worse off after a large exporting country imposes an export quota?

(Figure: Home's Exporting Industry II) The graph shows the effect of a subsidy on a large country. D describes home demand and S describes home supply. According to the figure, if the world price of the product is $100, the home demand for the product is _____ and the exports are ______.

In general, an export subsidy:

(Scenario: Payoff Matrix for Airbus and Boeing) This payoff matrix describes actions in developing so-called superjumbo jets that can carry 600 or more passengers. In each element, the lower-left value gives the outcome for Boeing based on the action of Airbus and the upper-right value gives the outcome for Airbus based on the action of Boeing. For example, in element A, each company will lose $10 million if they both decide to produce superjumbo jets. Which element in the payoff matrix describes the best choices of Airbus and Boeing when Boeing receives a $50 million subsidy?

Suppose that the world price of sugar is $100 per ton. If a large country gives its sugar exporters a subsidy of $50 per ton, then its exporters will receive (in total) :

(Figure: Home's Exporting Industry II) The graph shows the effect of a subsidy on a large country. D describes home demand and S describes home supply. According to the graph, what is the revenue cost for the government from the $100 export subsidy?

(Scenario: Payoff Matrix for Airbus and Boeing) The payoff matrix supplied shows outcomes of various strategies that Airbus and Boeing might follow in response to action on the part of the other company. This payoff matrix describes actions in developing so-called superjumbo jets that can carry 600 or more passengers. In each element, the lower-left value gives the outcome for Boeing based on the action of Airbus and the upper-right value gives the outcome for Airbus based on the action of Boeing. For example, in element A, each company will lose $10 million if they both decide to produce superjumbo jets. Boeing has decided NOT to produce superjumbo jets. Instead, it will continue to market its 450-passenger 747s. However, Airbus will produce superjumbo jets. Which element represents both of their decisions?

Which groups will be harmed the most as a result of the WTO's elimination of agricultural subsidies?

What is the difference between a direct and an indirect agricultural export subsidy?

Which of the following was a result of the 1992 agreement between the United States and the European Union to reduce subsidies to their aircraft industries?

(Scenario: Demand and Supply for Iron Ore) This table represents a demand and supply schedule for a small-country producer of iron ore. It sells output in its home market and on the world market at the world price of $70 per ton. Table: Demand and Supply for Iron Ore How many tons will be sold domestically when exporters receive a $10-per-ton export subsidy?

Suppose that the world price of sugar is $100 per ton. If a large country gives its sugar exporters a subsidy of $50 per ton, then the world price of sugar will: