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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 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 level of subsidies to the oldest industry in the country.
Answer
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