Question:

A production subsidy combined with free trade

by Guest63131  |  earlier

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a. has the same deadweight costs as a tariff.

b. has only consumption deadweight costs. .

c. has only production deadweight costs.

d. None of the above

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  1. a. has the same deadweight costs as a tariff.

    the only difference here is that in case of tariff it has positive revenue for government but in case of subsidy it really costs of government, thus sign is opposite but values are the same (if doe in relevant proportions and local producers are not demotivated by subsidy to loose productivity/efficiency).

    In case if word "same" means what it should be equal by sign - then option: "d. None of the above" is right.

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