Comparing the effects of import tariff and export subsidy on an economy, we may summarize that … . Select one – the most appropriate answer to fill in the space above.

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Question restatement: The prompt asks to compare the effects of an import tariff and an export subsidy on an economy and to select the most appropriate statement.
Option 1: 'They have different impact, however they both have positive consequences for an economy.' This is overly optimistic and misleading: tariffs and subsidies typically create distortions, may reduce welfare, and rarely have universally positive consequences; claiming they have positive effects for all economies ignores distributional and efficiency losses.
Option 2: 'They influence an economy in different ways: tariff produces the generally positive effect, while subsidy’s impact is negative.' This is incorrect in implying tariffs generally have a positive effect; most analyses emphasize deadweight losses from tariffs, terms-of-trade effects, and potential retaliation, rather than a clear positive outcome. Subsidies, including export subsidies, also create distortions and can have negative consequences; the blanket claim of tariff positivity is not supported.
Option 3: 'They both have similar impact, but the overall negative effect of tariff is expected to be higher.' This option argues that tariffs have a higher negative impact than subsidies. While both instruments generate distortions, this statement asserts tariffs are more harmful, which is not universally true and depends on context; many analyses show export subsidies can provoke even larger misallocations and global welfare losses, so this is an unlikely universal claim.
Option 4: 'No correct answer.' This would be chosen if none of the statements reasonably captured the comparison; however, there is a statement that aligns with common economic intuition about subsidy's negative effects compared to tariffs in terms of broader distortions, so declaring no correct answer would be inappropriate here.
Option 5: 'They both have similar impact, but the overall negative effect of subsidy is expected to be higher.' This option asserts that both instruments distort economies in similar ways (both create inefficiencies and welfare losses), but suggests that export subsidies tend to generate larger negative consequences overall due to global market distortions, budget costs, and potential retaliation; this aligns with standard comparative-trade theory that subsidies to exports can impose substantial distortions and welfare costs, often exceeding those of tariffs in magnitude in many contexts.
In summary, options 1 and 2 make overly positive or context-insensitive claims about tariffs, option 3 makes an unsubstantiated claim that tariffs are more harmful, option 4 denies any correct statement despite a plausible comparative claim, and option 5 presents a balanced view recognizing both similarity in distortion and the relatively larger negative impact of subsidies, which corresponds to the commonly discussed outcome in trade-misallocation analyses.

econ_420_120255_249094 Lesson 8 Quiz

Comparing the effects of import tariff and export subsidy on an economy, we may summarize that … . Select one – the most appropriate answer to fill in the space above.

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