Suppose the Government of a Small Country Has to Frame

Essay

Suppose the government of a small country has to frame a policy which would promote the level of domestic production or employment of import-competing industries. It is left with a choice of either imposing a tariff on the foreign goods or providing production subsidies to the domestic firms. Which policy will the government choose and why? Explain with a diagram. Is there a particular principle that can guide the government's decision? If so, name and state it.