Figure: Home's Exporting Industry II
The graph shows the effect of a subsidy on a large country.
(Figure: Home's Exporting Industry II) According to the
Graph, which of the following will help the large country
Avoid the deadweight loss from the subsidy?
A)Impose a tariff.
B)Impose a quota.
C)Provide cash to developing countries to purchase the product from the home country.
D)Impose trade restrictions.

Question

Figure: Home's Exporting Industry II
The graph shows the effect of a subsidy on a large country. 
(Figure: Home's Exporting Industry II) According to the
Graph, which of the following will help the large country
Avoid the deadweight loss from the subsidy?
A)Impose a tariff. 
B)Impose a quota. 
C)Provide cash to developing countries to purchase the product from the home country. 
D)Impose trade restrictions.

Quizplus · Accepted Answer

Providing cash to developing countries to purchase the product from the home country can increase demand and help avoid deadweight loss from the subsidy. This is because it will increase exports without causing overproduction, which would lead to the deadweight loss. Option A, B, and D do not directly address the issue of deadweight loss and may even worsen the situation.