ECON 208 Chapter Notes - Chapter 33: Import Quota, Export Restriction, Predatory Pricing

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Paul Dickinson

Document Summary

The case for protection: a country engages in trade protection to protect domestic firms and workers from foreign competition, there are several valid arguments for production, promoting diversification: For a small country, specializing in a few products involve risks such as the technology may render the basic product obsolete, swings in the world prices lead to large swings in national income: protecting specific groups. But the cost of such protection is a reduction in the country"s average living standards: improving the terms of trade. Tariffs: a tariff, imposes costs on domestic consumers, generates benefits for domestic producers, generates revenue for the government, the overall effect is negative, a tariff generates a deadweight loss for the economy. Import quotas and vers impose larger deadweight losses on the importing country than do tariffs that lead to the same level of imports. Tariffs versus quotas: exporting country prefers a quota.