Australia has only one firm that makes aircraft. Without assistance from the government, that firm has...

Australia has only one firm that makes aircraft. Without assistance from the government, that firm has lost most of its business to imports from the United States and Europe. Which of the following policies would be most costly for the Australian nation as a whole, and which would be least costly? Explain.

Policy A: Paying the lone Australian firm a production subsidy per plane, without protecting it against imports.

Policy B: Imposing a tariff equal to the production subsidy in Policy A.

Policy C: Imposing an import quota that cuts imports just as much as Policy B would.

Solutions

Expert Solution

A) Paying the lone Australian firm a production grant per plane, while not protective it against imports. Giving suppose five hundredth grant can bring the price of productionand the australian comapny will sell a lot of planes and build profit.
B) imposing a tariff adequate to the assembly grant within the higher than possibility A
Imposing tariff adequate to grant can build the the foreign planes costlier than the domentic firm which is able to increse sales of domestic firm. this may be AN earning for the govt also.
C )imposing AN import quota that cuts Imports even as very much like the choice eight.
Imposing import quota on foreign merchandise can shield the domestic market and can result in increase its sales and ultimately their gross domestic product
So the most cost-effective possibility is B and costliest is possibility A wherever the govt must offer loans to the Australian firm.

Rahul Sunny answered 1 year ago

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