Domestic demand for fidget spinners in the domestic economy is characterized by the equation P=100-2Q, domestic...
Domestic demand for fidget spinners in the domestic economy is characterized by the equation P=100-2Q, domestic supply is characterized by the equation Q=P-10, and the world price is equal to 60. Then the export subsidy of 10 per unit will
a) lead to a decrease in the world price by 10
b) increase domestic exports by 15
c) increase domestic exports by 10
d) change nothing
Homework Answers
Exports before subsiy is 50 - 20 = 30 units
Exports after subsidy is 60 - 15 = 45 units
Exports rises by 15 from 45 to 30.
Option B is correct.
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