How do export subsidies provided by foreign governments on goods where Pakistan has a comparative disadvantage affect Pakistan?

Show Answers

They reduce the overall well-being of the Pakistani populationThey result in an increase in consumer surplus for Pakistani buyersThey motivate Pakistan to produce more of the competing productsThey prompt Pakistani laborers to seek higher wagesThey improve Pakistan’s export competitiveness in those goods

Explanation

When foreign countries subsidize exports in areas where Pakistan is at a comparative disadvantage, it generally lowers the prices of those imported goods in Pakistan. This benefits Pakistani consumers by increasing their consumer surplus, as they can purchase goods at cheaper prices. However, it does not encourage Pakistan to produce more of those goods or necessarily improve worker wages in those sectors.