Protectionist Subsidies - a subsidy is a payment by the government to a firm for each unit of output produced.
There are two types of subsidies under trade protection:
Production subsidy: intended to protect domestic firms that compete with imports.
Export subsidy: a subsidy intended to protect domestic firms that export.
We focus more on the production subsidy.
Protectionist Subsidies
Production subsidies are payments per unit of output granted by the government to domestic firms that compete with imports.
Protectionist Subsidies
Protectionist Subsidies - Assume the US government provided a $2,000 subsidy to American auto manufacturers for every car produced.
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