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Q. Consider a small country that exports steel. Assume that a "pro-trade" government deicdes to subsidize the export of steel by paying a certain amount for each ton sold abroad. Elucidate how does this export subsidy affect the domestic price of steel, the quantity of steel produced, the quantity of steel consumed also the quantity of steel exported? Elucidate how does it affect consumer surplus, producer surplus, government revenue also total surplus? is it a good policy from the standpoint of economic efficiency?
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