Final answer:
Export subsidies impact allocative efficiency, consumer surplus, and producer surplus, and often result in deadweight loss. Allocative efficiency is distorted, as subsidies lead to overproduction. Producer surplus tends to increase due to higher revenue, while consumer surplus can also increase due to lower prices.
Step-by-step explanation:
When examining the impact of export subsidies, we must consider how they affect various economic aspects, such as allocative efficiency, consumer surplus, producer surplus, and the tax incidence.
Allocative efficiency occurs when the economy's resources are distributed in a way that maximizes total surplus. Export subsidies often lead to a situation where domestic prices are artificially lowered, encouraging an increase in production and consumption beyond the efficient equilibrium level, which distorts allocative efficiency.
Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. An export subsidy can increase consumer surplus in the domestic market since consumers often end up paying a lower price because of the subsidy, though this might not be the case if the subsidized product is primarily exported.
Producer surplus is the difference between what producers are willing to accept and what they actually receive. Subsidies usually increase producer surplus because they effectively raise the producers' revenue by allowing them to sell at higher prices on the international market or by compensating them for lower domestic prices.
The deadweight loss is the reduction in total surplus that occurs when the market produces at an inefficient quantity, typically caused by market interventions like subsidies. To calculate deadweight loss, one would subtract the total surplus with the subsidy from the total surplus at the efficient equilibrium. This area is often illustrated in supply and demand graphs as the triangles formed by the change in supply or demand curve due to a subsidy or tax.
Tax incidence refers to the distribution of the tax burden between buyers and sellers. In the case of an export subsidy, the tax burden is often on the taxpayers who fund the subsidy. The gain to producers from the subsidy may be partially or completely offset by the taxes they pay as taxpayers.