Question

Australia has only one firm that makes aircraft. Without assistance from the government, that firm has lost most of its business to imports from the United States and Europe. Which of the following policies would be most costly for the Australian nation as a whole, and which would be least costly? Explain.

Policy A: Paying the lone Australian firm a production subsidy per plane, without protecting it against imports.

Policy B: Imposing a tariff equal to the production subsidy in Policy A.

Policy C: Imposing an import quota that cuts imports just as much as Policy B would.

Answer 1

Answer: * The following polítics would be most costly for the Australian nation as a whole, & which would be least costly & Policy As, paying the loan Australian firm a production Subsidy por plane, without protecting it against imports. + suppose, 50.). Subsidy will bring the cost of production australian company can sel? more planes & make proutit. policy B ir imposing a tarilt equal to the production subsidy in polisya simposing tariff equal to the ribedly will make the foreign planes costlier than the domestic firm which will increase seleset domestie firm. This will be an savning for the government as well. _policageimposing an import quota that cels inport.s just as much as policy B would - on forcier goods imposing import quota will protect the domestie makel will lead to increase itj sales and wifti metely the GDP.

So, 2. The cheapest option is policy & and most castly is option policy where the government has to give loans to the Australian firm.