According to Krugman, the ideal way for a country to respond, when the

QUESTION

According to Krugman, the ideal way for a country to respond, when the foreign competitors of its companies are already being supported by government subsidies, is probably not to engage in retaliatory action, but to:

A. help establish rules that minimize the use of trade-distorting subsidies.

B. adopt the strategic trade policy as a way to establish domestic firms in a dominant position in the global industry.

C. provide a subsidy to a new industry where the foreign competitors have not had the benefit of such strategic trade policies.

D. use a combination of home-market protection and export-promoting subsidies.

E. provide high levels of subsidies to the oldest industry in the country.

ANSWER

A