A small country has a comparative advantage in the production of pencils. The government establishes an export subsidy for pencils to promote economic growth. Which of the following will be the most likely result of this policy?
A.As new domestic producers enter the pencils market,supply will increase and domestic prices will decline.
B.The increase in the domestic producer surplus will exceed the sum of the subsidy and the decrease in the domestic consumer surplus.
C.Although domestic producers will receive a net benefit,the policy will give rise to inefficiencies that cause a deadweight loss to the national welfare.
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