chapter 10 Flashcards
non tariff barriers
reduces imports by limiting quantities, increasing costs or creating uncertainties in the market
import quotas
sets a maximum quantity of imports. if markets are competitive, a quota has the same effects as a tariff. imposing a quota rises the domestic price and reduces domestic quantity demanded.
bad for small countries,
the effects of an import quota (small country)
producer gain: a
government revenue: c
deadweight: d and b
loss in consumer surplus: a+b+c+d
voluntary exports restraints
government in the importing country compels the foreign exporting country to agree “voluntarily” to restricts its export to its country
government procedurement
laws and government rules that favour local products when the government is the buyer
what is an externalitie
when a transaction between buyer and seller affects a third party
they are an important source of market failure that we experience every day, although we may not be aware of it
negative externality
impact on the bystander is adverse
positive externality
impact on the bystander is beneficial
specificity rule
if an externality is present, government policy should intervene as directly as possible on the specific source of the externality, to most enhance national economic efficiency
how should the government act on the specificity rule
if a country has some other objective, government policy should intervene as directly as possible in the specific objective, to minimize the national economic cost of achieving the other objective (that is, to minimize the amount of economic inefficiency created)
key: identify the specific problem, the use a policy to attack the problem directly
arguments for and against protection
promoting domestic production or employment
the infant industry argument
the dying industry argument
the developing government argument
non-economic
national prise, national defense and income redistribution
