Subsidies The Figure below shows a country's domestic supply and demand curves for a good, as well as the world price, P, for the good that it faces, as a small country, on the world market. Initially, the country is exporting X* units of that good at that price. Suppose that producers in this industry lobby policy makers to provide them with some sort of assistance to help them, Policy makers have two policy options available, either an export subsidy or a domestic subsidy, in the amount s. They have turned to you as experts in the field for advice on the best policy to follow. Price Figure 2 GROUP 1 GROUP 2 Domestic Subsidy Export Subsidy Change in Consumer Surplus | No change -(a+b) Change in Producer Surplus | +{a+b+c) +{a+b+c) Cost of subsidy to the Gowt. -(a+b+c+d) -(b+c+d)$ Deadweight Loss -d -(b+d)