Economics 1021A/B Lecture Notes - Deadweight Loss, Export Subsidy, Import Quota

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24 Apr 2012

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ECON 1021A/B Full Course Notes

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Governments intervene in international trade to protect domestic producers from competition. Tariffs: a tax on a good that is imposed by the importing country when an imported good crosses its international boundary, effects. Raises the price, more is supplied, less is imported: winners, losers, an social loss from a tariff. Canadian consumers lose because higher price and smaller quantity bought. Canadian producers gain because they can sell them at a higher price so they produce more. Canadian consumers lose more than canadian producers gain. Society loses: a deadweight loss arises: society loses: a deadweight loss. Some of the loss of consumer surplus is transferred to producers and some is transferred to the government as tariff revenue. But the increase in production costs and the loss from decreased imports is a social loss. Import quotas: a restriction that limits the maximum quantity of a good that may be imported in a given period.

Related Questions

Question One feature of the U.S. and other nominally free market capitalist economies are constant calls for government to interfere in the operation of the market.

These proposed intrusions take many forms--taxes, regulations, restrictions on trade, quotas, and banning production, trade and consumption of selected goods.

Pick all that apply to the question

1 In the case of international trade, removing restrictions on imports, e.g. tariffs and trade bans, would make consumers better off by lowering prices..

2 In the case of international trade, removing restrictions on imports, e.g. tarriffs and trade bans, the gain to consumers far outweighs the loss to selected domestic workers and producers leaving the general population better off overall.

3 In the case of international trade, removing restrictions on imports, e.g. tariffs and trade bans, would make owners and workers at firms competing with imports worse off.

4 None of the answers are correct.

5 In the case of international trade, restrictions on imports, e.g. tariffs and trade bans, are an example where eliminating those restrictions would create a large benefit to the general population and a small loss to firms that would face competition from overseas firms.

Governments often intervene in international trade and impose quotas to:

a. Shift a nation's production possibilities frontier.

b. Increase revenues from export subsidies.

c. protect domestic industries from foreign competition.

d. Improve the performance of multinational corporations.