Economics 1021A/B Chapter : Textbook Notes - Oct 26.docx

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24 Apr 2012

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ECON 1021A/B Full Course Notes

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A tariff is a tax on a good that is imposed by the importing country when an imported good crosses its international barrier. Tariffs and other restrictions on free international trade decrease the gains from trade and are not in the social interest. The effects of a tariff: buyers now have to pay the price, plus the tariff, changes: Winners, losers, and the social loss from a tariff: canadian consumers lose, canadian producers gain, canadian consumers lose more than canadian producers gain, society loses: a deadweight loss arises. An import quota is a restriction that limits the maximum quantity of a good that may be imported in a given period. Import quotas enable the government to satisfy the self-interest of the people who earn their incomes in import-competing industries. An import quota decreases the gains from trade and is not in the social interest.

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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.

25) Canada exports athletic coaching services and imports computer tech support. The price of athletic coaching services in Canada is higher with international trade than without international trade. As a result of trade in athletic coaching services, the Canadian producer surplus from athletic coaching services increase and the Canadian consumer surplus from athletic coaching services dorten A) lower, decreases; decreases B) higher, increases, increases Exports> means chegar lo produce C) higher, increases; decreases Imports more egersine D) lower; decreases: increases E) higher, decreases: increases

1. Explain what the terms of trade are in international trade.

2. What is the exchange rate in international trade?

3. What is the difference between a tariff and an import quota?

4. Do you believe the United States should impose international trade restrictions and why do you believe this?

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Economics 1021A/B Chapter : Textbook Notes - Oct 26.docx

ECON 1021A/B Full Course Notes

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