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What are the major forms of subsidies that governments may implement to protect domestic producers from...

  1. What are the major forms of subsidies that governments may implement to protect domestic producers from foreign competition? Explain.
  1. Which is a more restrictive trade barrier—an import tariff or an equivalent import quota? Explain
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Answer #1

Government will reduces the taxes that are paid by Domestic producers, will provide them goods and other materials which they require at subsidy cost. Government will also encourage the banks to give loans to domestic producers so that they can use that amount for their business. Government will create employment by promoting industries in other countries.

Import quota will always be a restrictive trade barrier because suppliers or producers can't import more than that quota from other countries which will help our domestic producers to capture the domestic market. Even if there import tariff it won't be as effective as import quota as people sometimes will be willing to pay more for goods. Hence import quota is a better restrictive trade barrier.

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