ECON 110 Chapter Notes - Chapter 34: National Treatment, Market Power, Comparative Advantage

• School: Queen's University
• Department: Economics
• Course: ECON 110
• Professor: Ian James Cromb

Document Summary

Should countries have completely free trade, or sometimes protect domestic producers. If protection is desireable should it be achieved through tariffs or non-tariffs: tariffs are taxes designed to raise the price of imported goods, non-tariffs are devices other than tariffs designed to reduce the flow of imports. The gains from trade were demonstrated in the previous chapter. In summary, each country should specialize in the prod which they have the lowest opportunity cost and trade for the rest world production and consumption increases. Free trade makes the country as a whole better off, even though it may not make every individual in the country better off. Two arguments the first concerns objectives other than profit maximizing national income; the second concerns the desire to increase one"s national income. If the gov"t encourages a more diversified economy by protecting domestic industries they can better mitigate these risks.