An Export Subsidy Has the Opposite Effect on Terms of Trade

question 1

Essay

An export subsidy has the opposite effect on terms of trade to the effect of an import tariff. Domestically a tariff will raise the price of the import good, deteriorating the domestic terms of trade. A production subsidy for the export product will lower the local price of the export good, lowering the domestic terms of trade for the country. Hence the export subsidy and the import tariff have the same effect. This analysis seems to contradict the first sentence in this paragraph. Discuss this paradox.

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Definitions:

Employment Discrimination

Unfair treatment of employees or job applicants based on race, gender, age, religion, nationality, disability, or sexual orientation instead of job qualifications or performance.

Tournament Pay

A compensation structure where rewards are based on relative performance, often used in settings where output is hard to measure individually.

Marginal Revenue Product

The additional revenue generated from using one more unit of a factor of production, holding all other factors constant.

Productive Employees

Workers who achieve a high output in relation to their input, contributing effectively to the organization's goals.