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CA Foundation · Business Economics · International Trade

The Indian government pays a producer subsidy of ₹6 per kg to domestic sugar exporters. The cost of production is ₹36 per kg and the exporter sells abroad at ₹38 per kg. What is the exporter's profit per kg after the subsidy?

The exporter earns ₹8 per kg. Without subsidy the margin is ₹38 minus ₹36, which is ₹2. The government subsidy of ₹6 per kg adds to this, giving a total profit of ₹8 per kg.

  1. A₹2
  2. B₹6
  3. C₹8Correct
  4. D₹4

Explanation

Profit before subsidy = 38 − 36 = ₹2 per kg. Adding the subsidy of ₹6 gives 2 + 6 = ₹8 per kg. Option B ignores the existing margin, and option A ignores the subsidy.

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