If the Japanese government subsidizes radios shipped to Mexico by $15 to help firms penetrate the market, what is the outcome of this trade policy ?
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Answer: B. The price of radios in Mexico equals $30 and its imports equal 30 radios
Explanation
Export subsidies lower effective international prices and expand export volumes into markets. Option B correctly matches the resulting price and import volume under the subsidy policy. Financial support from governments allows exporters to sell goods profitably at lower price points. Export subsidies provide financial incentives to domestic producers for every unit sold abroad. Lower prices in importing countries stimulate higher consumer demand and increased trade volumes. Trade distortion models illustrate how subsidies shift international supply curves outward.
Subsidies frequently spark trade disputes because they undercut foreign domestic competitors unfairly. World Trade Organization rules strictly regulate and penalize actionable export subsidies globally. Consumer nations benefit from cheaper imports while local industries in those nations suffer. Option A states incorrect price and import figures that do not match the policy outcome. Option C provides mismatched values that fail to reflect the subsidy market equilibrium. Option D lists incorrect pricing and volume changes inconsistent with standard trade models.
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