ECON 1050 Chapter 7: Economics-1 (1) (dragged) 5
17 Sep 2016
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Thousands of detailed health, safety, and other regulations restrict international trade. An export subsidy is a payment made by the government to a domestic producer of an exported good. Export subsidies bring gains to domestic producers, but they result in overproduction in the domestic economy and underproduction in the rest of the world and so create a deadweight loss. Despite the fact that free promotes prosperity for al countries, trade is restricted. Comparative advantages change with on-the-job experience called learning-by-doing. When a new industry or a new product is born an infant industry it is not as productive as it will become with experience. It is argued that such an industry should be protected from international competition until it can stand alone and compete. Learning-by-doing is a powerful engine of productivity growth, but this fact does not justify protection. Dumping occurs when a foreign firm sells its exports at a lower price than its cost of production.
