Final answer:
An export subsidy lowers the production costs, causing a downward shift in the supply curve and a decrease in the price of the good, leading to an increase in the exported amount of that good.
Step-by-step explanation:
An export subsidy is akin to a reduction in production costs for producers. This financial assistance effectively shifts the supply curve downward or to the right, resulting in a decrease in the price of the subsidized good. As a consequence, producers can sell their goods at more competitive prices in international markets.
When applied to a significant extent, a subsidy can lower the price of a good, such as sugar, to the point where it falls below the cost of production of foreign competitors.
This can lead to a scenario where foreign producers incur losses for any goods they produce and sell. As a result of these dynamics, the correct answer is that an export subsidy for a good causes the amount of that good exported to increase.
Additionally, export subsidies can have broader economic implications. For example, while they enhance the competitiveness of the subsidized industry, they can inadvertently raise production costs in other industries if the subsidized goods are used as inputs. Moreover, by influencing trade dynamics, subsidies can also affect employment and the overall health of an economy.