Question

ABC Country provides tax breaks to domestic manufacturers in a certain industry so that their costs of production are lower. ABC country does this so that these domestic manufacturers can then export and sell their products in other countries at lower prices in order to better compete with competitors in those other countries.

These tax breaks are an example of what?

A. Export financing
B. National competitive advantage
C. Socialism
D. Subsidies
E. Property rights

Answer 1

The tax breaks provided to domestic manufacturers by ABC Country so they can export at competitive prices are an example of subsidies.

Step-by-step explanation:

The tax breaks provided by ABC Country to domestic manufacturers in a certain industry to help them compete internationally are an example of subsidies. Subsidies can take the form of direct cash payments, tax cuts, or other financial advantages provided by the government to support industries it considers important. These measures are designed to decrease the costs of production for these manufacturers, enabling them to sell their products at competitive prices in international markets. This method not only helps maintain domestic employment but also aims to strengthen the country's presence in the global market. However, this could lead to higher prices for domestic consumers and potential trade tensions with other countries.