ECO100Y5 Lecture Notes - Lecture 1: Economic Efficiency, Comparative Advantage
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The gains from trade: arise when nations export goods in which they have a comparative advantage. (figure 33-5) losses to consumers for these exported goods are smaller than the gains to producers. Losses to domestic producers in the impost sector will be smaller than gains to consumers. So total surplus rises. (figure 33-6) economic efficiency is increased by free trade. People who are opposed to free trade argue that free trade makes nations dependent, that specialization is risky, or that specialization can be boring are arguing from a political position. Import tariffs: are taxes on imported goods. (figure 34-1) the sum of gains to domestic producers and tariff revenues collected by government customs officers will always be smaller than losses accruing to consumers. Import quotas: are quantity restrictions on imported goods. (figure 34-2) the sum to domestic producers and economic rent collected by licensed importers (licensees) will always be smaller than losses accruing to consumers.