5 Flashcards
What effect does the distribution of import licenses have?
The distribution of import licenses and method distribution decides where the welfare (area c) goes.
Tariff-rate Quota
A device that allows a specified number of goods to be imported at one tariff rate (the within-quota rate), and any imports above that specified number to be imported at a higher tariff rate (the over-quota rate).
Domestic Content Requirement
Requirements that stipulate the minimum percentage of a product’s total value that must be produced domestically if the product is to qualify for zero tariff rates.
Does a production or export subsidy cause greater efficiency loss?
export subsidy.
(Absolute) Import Quota
limit on the number of imports of a specific good to a country during a specific time period.
Import License
gives importers permission to import the quota good up to a limit over a period of time. Can be distributed by several ways.
Global Quota
limit on imports of a specific good over a period of time where the quota applies to the globe (all countries).
Specific Quota
limit on imports of a specific good over a period of time where the quota applies to a specific country.
Shape of Quota diagram in small country
supply curve is ‘kinked.’
NNW as a results of these methods of import license distribution: license given to foreign producers, license given to domestic wholesalers, license auctioned by government.
- NNW = -(b + c + d)
- NNW = -(b + d); the additional welfare stays domestic.
- NNW = -(b + d); welfare goes to government in the form of revenue.
What is a VER?
Voluntary Export Restriction: basically an export quota.
Equivalent Tariff
terms of tariff which creates the same number of imports as a certain quota would.
What makes Tariffs better than Quotas?
Tariffs are more elastic to change and do not raise the price of the good overtime.
NNW change for a production subsidy? How much does consumer surplus change?
-d or -b; consumer surplus does not change.
Quota Rent
welfare/income earned by those who import goods under a quota. Could be domestic wholesalers, the domestic government, or foreign producers.
