1. Visit http://www.investordictionary.com/definition/subsidy.aspx and summarize what you read into a short definition of subsidy.

The students will find an expanded discussion of the term subsidy along with examples and a discussion of how subsidies are basically the opposite of a tax. The contents of the site are repeated below for your convenience.
A subsidy is a grant or monetary gift given by a private person or entity (often a government) to another private person or entity, as financial assistance or to help launch an enterprise. Critics of government interventions in free markets often use a wider definition, arguing that whole industries have come to rely on subsidies without accepting that label; these critics consider any form of production subsidized if it does not bear the full costs of its operation, be it due to acquiescence or support by the state. Supporters of subsidies often justify their use as intended for some socially beneficial purpose, although economists point out that subsidies may often have socially detrimental effects.
Examples of subsidies include welfare, farm subsidies, and certain aspects of student loans. A subsidy normally exemplifies the opposite of a tax, but can also be given using a reduction of the tax burden. These kinds of subsidy are generally called tax expenditures.

2. Discuss how a tariff on imported goods makes the import more expensive and supports a higher level of sales for domestic production of the same good.

A tariff is a tax collected on goods entering a country. As this tax is passed on to consumers the price of the good in question is higher than it would have been without the tariff. The price of the domestically produced good is relatively less expensive resulting in a higher level of sales. Tariffs are often used to “protect” domestic producers from foreign competition. In relation to the article, The U.S. and European Union want developing nations to lower their trade barriers which would make U.S. goods and services less expensive and improve sales from the U.S. to the other countries.

Multiple Choice/True False Questions