An export subsidy raises the domestic price above the world price by the amount of the subsidy because domestic firms would be unwilling to sell at home for less than they would receive if the product was exported. (see diagram)
As a result, consumers lose areas A and B.
Producer surplus rises by areas A+B+C+D+E.
The cost of the subsidy to the government equals areas B+C+D+E+F.
Overall, there is a net national loss (DWL) equal to areas B+F.
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