ECON-2006EG Study Guide - Quiz Guide: Final Good, International Trade, Asteroid Family

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Import quota: an import quota is a direct restriction on the quantity of some good that may be imported. This causes the price to be bid up until the market clears. In assessing the costs and benefits of an import quota, it is cru- cial to determine who gets the rents. When the rights to sell in the domestic market are assigned to governments of exporting countries, as is often the case, the transfer of rents abroad makes the costs of a quota substantially higher than the equivalent tariff. Ver clearly produces a loss for the importing country. from a national point of view, vers are much costlier than tariffs. Instead, it allows firms to import more, provided that they also buy more domestically. Suppose that purchasing the same parts domestically would cost ,000 but that assembly firms are required to use 50 percent domestic parts.

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