Pacifica is a small island nation in the Pacific Ocean. It is a relatively low income country, with a per capita income of $8,000. Agriculture is its main industry and rice, which is a staple of the local diet, is one of its primary crops. Because it is a small country, Pacifica's agricultural production has no influence over global prices. In order to protect its farmers from world competition, Pacifica currently bans imports of rice. All rice consumed on the island is grown by local farmers. This policy is of great benefit to farmers. A bag of rice in Pacifica sells for $8.00. 500,000 bags or rice are consumed per year. If consumers were allowed to purchase rice grown abroad, they could purchase bags of rice for just $5.00. A local legislator is concerned about the impact the import ban has on low-income families. This legislator proposes removing the import ban. Concerned about the fate of farmers, a second legislator argues that rice production should instead be subsidized. Since the world price of rice is $3 less than the local price, he proposes a subsidy of $3 per bag of rice. To make the policy easier to implement, this payment