Economics 4.1.5 Flashcards
“What is the aim of free trade?”
“Free trade aims to maximise global output based on the principle of comparative advantage.”
“What is protectionism?”
“Protectionism is the practice of limiting free trade to protect domestic industries and economies.”
“What are some forms of protectionism?”
“Forms of protectionism include limiting imports, limiting exports, boosting exports, and putting administrative barriers in place.”
“What is the reason for protecting infant industries?”
“To protect new firms that would be unlikely to succeed at startup due to global competition.”
“What are sunset industries?”
“Sunset industries are firms at the end of their life cycle that the government supports to limit economic damage from abrupt closures.”
“What are strategic industries?”
“Strategic industries are essential for self-sufficiency and security, such as energy, defense, and agriculture.”
“What is dumping?”
“Dumping refers to selling products at a lower price in foreign markets, harming local industries.”
“How does protectionism relate to employment?”
“Governments may protect jobs when firms outsource production or industries face structural unemployment.”
“What does protectionism aim to correct in the current account?”
“Protectionism aims to correct a current account deficit where imports exceed exports.”
“What is the role of labour/environmental regulations in protectionism?”
“Many countries offer cheap labor and low-cost production due to poor regulations; protectionism applies pressure to improve these conditions.”
“What are the commonly used forms of trade protectionism?”
“The commonly used forms include tariffs, subsidies, quotas, and administrative barriers.”
“What is a tariff?”
“A tariff is a tax on imported goods/services (customs duty).”
“What effect do tariffs have on domestic producers?”
Tariffs raise the cost of foreign goods that are imported, therefore demand pf domestic goods should increase.
However, if the domestic producer exports goods then tariffs may cause them to increase prices and decrease demand from abroad
“What happens to the price of imports when a tariff is imposed?”
“When a tariff is imposed, the price of imports increases, reducing the quantity of imports.”
“What is a quota?”
“A quota is a physical limit on the amount of imports allowed.”
“What is the impact of quotas on market prices?”
“Quotas typically raise market prices by limiting cheaper imports, potentially creating shortages.”
“What is a subsidy?”
Government funding
“A subsidy lowers the cost of production for domestic firms, allowing them to increase output and lower prices.”
“What effect do subsidies have on domestic producers?”
lower production costs and, consequently, prices, making their goods more competitive in domestic and international markets.
“What are non-tariff barriers?”
“Non-tariff barriers include regulations that restrict imports without direct taxes, such as health and safety standards.”
“What is one example of a non-tariff barrier?”
“An example is health regulations that effectively block imports based on specific safety standards.”
“What are the impacts of protectionist policies on consumers and the government?”
protectionism can lead to higher prices for consumers, reduced competition, and reduced innovation
The government may benefit from increasedtax revenue as if goods are still imported they will receive tariffs from them
“What happens to domestic producers after a tariff is imposed?”
“Domestic producers increase output and revenue after a tariff is imposed.”
“What happens to consumers when tariffs are imposed?”
“Consumers face higher prices and reduced choices due to tariffs.”
“What tax revenue does the government receive from tariffs?”
“The government receives tax revenue based on the difference in price from tariffs imposed.”
