Export subsidies levied by foreign governments on products in which the Pakistan the comparative disadvantage ?
Correct answer: B. lead to increases in Pakistani consumer surplus
- A. lower the welfare of all Pakistanis
- B. lead to increases in Pakistani consumer surplus
- C. encourage Pakistan's production of competing goods
- D. encourage Pakistani workers to demand higher wages
Explanation
A foreign export subsidy lowers the price of imported goods in Pakistan, increasing the purchasing power and consumer surplus of Pakistani buyers. Pakistani producers of competing goods may lose, so the benefit is not shared by all domestic groups.
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