Economics of Public Issues (19th Edition)
19th Edition
ISBN: 9780134020532
Author: Miller
Publisher: PEARSON
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Question
Chapter 23, Problem 1DQ
To determine
American corn farmers receive billions of dollars in taxpayer subsidies each year. These subsidies allow them to sell their grain at prices below what it costs to produce it, particularly for export markets. How do the U.S corn subsidies hurt Mexican farmers?
Concept Introduction:
Subsidy is a form of compensation given to economically backward people either to the consumer or to the producer in order to bring them to the mainstream of the economy. It can be in the form of direct cash, compensation and so on.
The goods or service which is produced in the domestic country and sold to a foreign country is referred to as export.
Expert Solution & Answer
Explanation of Solution
- American corn farmers receive billions of dollars in taxpayer's subsidies each year. These subsidies allow them to sell their grain at prices below the cost of production. U.S corn subsidies hurt Mexican farmers adversely.
- Today the world has been globalized due to free and fair international trade, however, such practices that are anti-dumping is practiced by many countries to control the world's market. The subsidy provided to the U.S. farmers in the production of corn leads to unfair competition in the world market.
- This is because farmers of U.S. are able to incur lower cost than it would have been without subsidy. This makes them export enough goods on the world market. In this way.
- Mexican farmers could not export as the real price incurred in the production of corn is more for them as compared to American farmers who are given subsidy to lower the cost of production.
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Chapter 23 Solutions
Economics of Public Issues (19th Edition)
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