Monday, June 16, 2014

Chinese Car Production Subsidies

The Wall Street Journal reports that various branches of the Chinese government are subsidizing auto manufacturing.  One of the problems that we see in Prin. of Microeconomics of subsidies is that they give incentives to firms to "over-produce", meaning that the amount of output produced is more than can be sustained.  As you can see in this article, that is exactly what is happening.

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