Assume that Country A provides a subsidy on its exports to Country B. Country B is about to impose a countervailing duty (of the same magnitude as the export subsidy) on the imports from Country A. Which of the following statements is true in this context?
A. The exporters in Country A gain surplus when the government of Country B imposes a countervailing duty.
B. The consumers in Country B are better off after the government of Country B imposes a countervailing duty.
C. The import-competing producers in Country B are worse off after the imposition of the countervailing duty by the government.
D. The overall national well-being of Country B would be lower when the domestic government imposes a countervailing duty to offset the impact of the export subsidy.
Answer: D
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