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Production subsidy vs. tariff A country is considering a tariff or a production subsidy to protect a domestic industry from imports. a)Assuming the production subsidy

Production subsidy vs. tariff

A country is considering a tariff or a production subsidy to protect a domestic industry from imports.

  1. a)Assuming the production subsidy is the same % as the tariff, which policy is preferable if we consider only the dead-weight loss? Draw graphs that support argument.
  2. b)If the policy-maker's only concern is redistributing gains from trade (not an infant industry argument), identify one other policy she could pursue? explain how that policy achieves the stated goal.

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