Consider a small country that exports steel. Supposethat a ''pro--trade'' government decides to subsidizethe <:xport of s teel by paying a certain amount for eachton sold abroad. How docs this export subsidy affectthe domestic price of steel, the quantity of steel produced,the quantity of steel consunuxS, and the quantityof steel exported? How docs it affect consumersurplus, producer surplus, g·ovemment revenue, andtolal surplus? Is it a good policy from the standpointof oconomic efficiency? (Hint: The analysis of anexport subsidy is similar to the analysis of a tariff.)

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