Governments Sometimes Subsidize Domestic Industries. When This Occurs

question 133

Multiple Choice

Governments sometimes subsidize domestic industries. When this occurs

• A) the governments will not impose tariffs.
• B) the subsidized sell less in international markets because it is more profitable to sell at home.
• C) the subsidized industries have an advantage on international markets relative to non-subsidized firms. For this reason, other countries often impose tariffs on the subsidized imports.
• D) the subsidized industries have an advantage on international markets relative to nonsubsidized firms. However, this is not an argument for imposing tariffs and tariffs would violate international agreements.

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Definitions:

Manufacturing Overhead

The indirect costs associated with manufacturing, not directly assignable to a specific product, such as factory rent, utilities, and equipment maintenance.

Cash Account

An account that records cash transactions, including cash received and cash paid out, within a business.

Direct Labor

The wages of employees who are directly involved in the production of goods or delivery of services.

Standard Costs

Predetermined costs for materials, labor, and overhead used as a benchmark to assess the actual performance and efficiency of production.