ECON 040 Lecture Notes - Lecture 26: Italian Wine, Economic Surplus, Bauxite
22 Oct 2020
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Document Summary
It has been shown the total surplus is higher with trade than without, but domestic consumers lose surplus when their country starts to export the good and domestic producers lose surplus when their country starts to import. Consumers have access to a wider variety of goods (italian wine, indian movies) Producers may be able to take advantage of economies of scale by selling to a larger market (bauxite, copper) Domestic monopolies or oligopolies might face international competition, reducing their market power (bookstores) The flow of ideas and technology is faster and easier. There are two forms of trade restrictions: tariffs and quotas. Import tariff: an import tariff rep- resents a tax on imported goods or services. Import quota: an import quota represents a quantity limit on the amount of goods or services permitted to be imported. With free trade, the world price is , domestic consumers purchase 7000 books and domestic producers supply 2000 books and australia imports 5000 books.
