4.1.4 - Protectionism

Question 1

What is protectionism?

Answer 1

When a government seeks to protect domestic industries from foreign competition

Question 2

What is a tariff?

Answer 2

Tax placed on imported goods from other countries
- Increases price of imported goods which shifts demand from foreign to domestic businesses

Question 3

What are the impacts on businesses from a tariff?

Answer 3

• Protects domestic industries from foreign competition
• • Foreign producers may have to cut production due to reduced demand (could lead to loss of jobs)

Question 4

Advantages of tariffs

Answer 4

+ Protect infant industries so they can become more competitive globally
+ Increases government tax revenue
+ Due to domestic products not incurring the tariff they are likely to be cheaper

Question 5

Limitations of tariffs

Answer 5

• Increases costs of imported raw materials which may lead to higher prices for consumers
• Reduces competition for domestic firms who may become inefficient and therefore produce poor quality products
• Reduces customer choice as imports are now more expensive

Question 6

What is an import quota?

Answer 6

Government imposed limit on the amount of a particular product allowed into a country

Question 7

Advantages of import quotas

Answer 7

+ Boosts local investment and protects domestic businesses
+ Creates more job opportunities
+ Greater tax revenue for the government

Question 8

Limitations of import quotas

Answer 8

• Limit supply so price of product may rise
• May generate tensions between trade partners
• Domestic firms may become more inefficient as quotas reduce the level of competition

Question 9

What is government legislation?

Answer 9

Governments can impose laws to restrict certain imports to protect customers and businesses
- Imports may need to meet strict regulations to be allowed into the country

Question 10

One advantage and one limitation of government legislation

Answer 10

+Allows domestic firms to grow as they limited foreign competition
- May create tensions from countries

Question 11

What are domestic subsidies?

Answer 11

Payments are given to domestic businesses to help lower costs of production

Question 12

2 advantages and 1 limitation of domestic subsidies

Answer 12

+ Reduced costs can lower prices
+ Remain competitive due to aid and can also protect jobs
- Businesses may become inefficient as they know costs are being subsidised