Suppose Country A is a major exporter of limestone in the world market. Which of the following policies can be taken by the government of Country A to enhance the gains from exporting limestone by raising its world price?
A. Taxing limestone exports
B. Setting a price ceiling on the limestone sold in the domestic market
C. Subsidizing export of limestone
D. Subsidizing the extraction of limestone
Answer: A
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A. another name for the objective function B. another game for the first order conditions, defining optimal choices C. equations relating the optimal choice of interest rates to other prices D. both A and B, but not C
Newspaper reports about good news in the economy are often followed by declines in stock and bond prices because
a. the Fed reacts in anticipation of the news to prevent speculation b. financial markets are often irrational c. financial markets prefer recessions to spending shocks d. stock and bond holders fear the Fed's reaction to possible overheating e. newspapers may be confused about the performance of financial markets