ECON 104 Lecture Notes - Lecture 10: Avoidance Speech, Voluntary Export Restraints, Free Trade

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chocolaterabbit120

4 Oct 2015

School

University of Victoria

Department

Economics

Course

ECON 104

Professor

Kenneth Stewart

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Document Summary

Comparative advantage is the fundamental force that drives international trade. The gains are greater than the losses in both situations. Tariff: a tax on a good that is imposed by the importing country when an imported good crosses its international boundary. Tariffs raise revenue for governments and serve the self-interest of people who earn their incomes in import-competing industries. The effects of a tariff: the price rises, the quantity bought decreases, the production domestically increases, the government collects a tariff revenue. Overall, canadian consumers lose more than canadian producers gain: societal loss. Import quotas: restriction that limits the quantity of a good that may be imported in a given period. The effects on quotas are similar to those of tariffs: canadians consumers of the good lose, canadian producers of the good gain, importers of the good gain, society loses. Tariffs bring in revenue to the government while quota brings profit to the importers.

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.

Suppose with free trade, the United States importing a backpack from Mexico costs $10, and the cost of importing a backpack from China costs $9, while a backpack produced in the US costs $14. Before NAFTA (members are US-Canada-Mexico), the US maintained a tariff of $60 against all backpack imports. Then under NAFTA, all tariffs between the US and Mexico are removed, while the tariff against China remains in effect. Assume that tariff does not affect the world price of a backpack.

1. Before NAFTA, the US imported backpack from:

a. China b. Both Mexico and china c. Mexico d. Neither Mexico nor China?

2. Under NAFTA, the US imports backpack from:

a. both Mexico and china b. neither Mexico nor china c. Mexico d. china?

3. As a result of NAFTA, consumers in the US (Loses- Gains - Neither Lose nor gain)? , and the US government (Loses -Gain -Neither gains nor loses) ? tariff revenue. Mexico (neither gain nor lose - gain- lose)? And china (gain - lose -neither gain nor lose)?

4. This is an example of trade (creation - diversion)? Resulting from a regional agreement.

limegoat817

1. True or False: Increases in imports will always lead to NET job losses in the U.S. domestic economy.

Would this be false?

2. True or False: If all countries could restrict imports and promote exports, world output would rise.

Would this be false as well?

3. Which of the following statement is FALSE?
A.Quotas restrict the quantity of a good that is imported into a country.
B.One result of quotas is that consumers of the good facing the quota will pay a higher price for the good.
C.Domestic producers of the good will benefit because they face less foreign competition.
D.Government collects the revenue from quotas.

Is it B?

4. True or False: If country A has an absolute advantage in producing many goods and services over another country B, then country A will NEVER have an incentive to trade with country B.

I want to say its False because regardless if country A has an absolute advantage it still needs to trade with country B. I think?

ECON 104 Lecture Notes - Lecture 10: Avoidance Speech, Voluntary Export Restraints, Free Trade

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