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8.2: Domestic Production Subsidies
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- Distinguish domestic production subsidies from export policies.
- Describe the motivations for government use of production subsidies.
- Domestic production subsidies are paid to firms for producing a product, whereas export subsidies are paid only to firms that export the product.
- The export subsidy is classified as a trade policy, whereas the production subsidy is a domestic policy.
- Production subsidies are used either to support the incomes within a sector or to stimulate production because it is believed that production will have a subsequent benefit.
- Jeopardy Questions. As in the popular television game show, you are given an answer to a question and you must respond with the question. For example, if the answer is “a tax on imports,” then the correct question is “What is a tariff?”
- The term describing the type of payment made by a government to a firm for each unit of a good the firm produces.
- The term describing the type of payment made by a government to a firm as a percentage of the value of a good the firm produces.
- Of domestic policy or trade policy, this describes a production subsidy.
- Of domestic policy or trade policy, this describes a specific export subsidy.