What describes the action of providing financial support to domestic firms from the government?

What describes the action of providing financial support to domestic firms from the government?

• A. Import quotas
• B. Subsidies
• C. Voluntary export restraints
• D. Anti-dumping duties

Answer: (B)

The action of providing financial support to domestic firms from the government is accurately described as subsidies. Subsidies are financial aids given by the government to support businesses and industries, aiming to enhance their competitiveness against foreign markets. This assistance can take various forms, including direct cash payments, tax breaks, or grants, encouraging firms to innovate, expand, and maintain employment. By lowering production costs, subsidies enable domestic firms to offer their products or services at more competitive prices compared to international counterparts. In the context of international trade, subsidies can play a strategic role, helping local businesses strengthen their market presence. Import quotas, voluntary export restraints, and anti-dumping duties are mechanisms related to trade regulation but do not involve direct financial support to domestic businesses. Import quotas limit the volume of goods that can be brought into a country, voluntary export restraints restrict the amount of products a country exports, and anti-dumping duties are tariffs imposed on foreign goods deemed to be priced below fair market value to protect domestic industries.

The action of providing financial support to domestic firms from the government is accurately described as subsidies. Subsidies are financial aids given by the government to support businesses and industries, aiming to enhance their competitiveness against foreign markets. This assistance can take various forms, including direct cash payments, tax breaks, or grants, encouraging firms to innovate, expand, and maintain employment. By lowering production costs, subsidies enable domestic firms to offer their products or services at more competitive prices compared to international counterparts.

In the context of international trade, subsidies can play a strategic role, helping local businesses strengthen their market presence. Import quotas, voluntary export restraints, and anti-dumping duties are mechanisms related to trade regulation but do not involve direct financial support to domestic businesses. Import quotas limit the volume of goods that can be brought into a country, voluntary export restraints restrict the amount of products a country exports, and anti-dumping duties are tariffs imposed on foreign goods deemed to be priced below fair market value to protect domestic industries.