Question

In the exporting country, an export subsidy will:

a) hurt consumers but raise the overall economic welfare of the exporting country.

b) hurt consumers but raise the overall economic welfare of the exporting country.

c) hurt consumers and lower the overall economic welfare of the exporting country.

d) hurt consumers but raise the overall economic welfare of the exporting country.

Rent-seeking activities are:

a) foreign suppliers' efforts to reduce quotas.

b) landowners' efforts to receive higher returns for their land.

c) domestic consumers' efforts to reduce tariffs.

d) bribery and lobbying activities to obtain quota licenses.

Answer 1

The correct answer: c) hurt consumers and lower the overall economic welfare of the exporting country.

Governments also regulate trade by providing various kinds of support for export producers. Export subsidies come in a variety of forms, but they share the trait in benefitting from government funds. These funds enable them to offer their products or services to other countries at lower prices. The objective of this support is to enable domestic producers to “win” sales by undercutting the prices charged by producers in foreign countries.

The correct option is: d) bribery and lobbying activities to obtain quota licenses.

When a firm uses its resources to procure an unwarranted monetary gain from external elements, be it directly or indirectly, without giving anything in return to them or the society, it is termed as rent-seeking. A popular example of rent-seeking is political lobbying by companies.

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