Economics 4.1.5

Question 1

“What is the aim of free trade?”

Answer 1

“Free trade aims to maximise global output based on the principle of comparative advantage.”

Question 2

“What is protectionism?”

Answer 2

“Protectionism is the practice of limiting free trade to protect domestic industries and economies.”

Question 3

“What are some forms of protectionism?”

Answer 3

“Forms of protectionism include limiting imports, limiting exports, boosting exports, and putting administrative barriers in place.”

Question 4

“What is the reason for protecting infant industries?”

Answer 4

“To protect new firms that would be unlikely to succeed at startup due to global competition.”

Question 5

“What are sunset industries?”

Answer 5

“Sunset industries are firms at the end of their life cycle that the government supports to limit economic damage from abrupt closures.”

Question 6

“What are strategic industries?”

Answer 6

“Strategic industries are essential for self-sufficiency and security, such as energy, defense, and agriculture.”

Question 7

“What is dumping?”

Answer 7

“Dumping refers to selling products at a lower price in foreign markets, harming local industries.”

Question 8

“How does protectionism relate to employment?”

Answer 8

“Governments may protect jobs when firms outsource production or industries face structural unemployment.”

Question 9

“What does protectionism aim to correct in the current account?”

Answer 9

“Protectionism aims to correct a current account deficit where imports exceed exports.”

Question 10

“What is the role of labour/environmental regulations in protectionism?”

Answer 10

“Many countries offer cheap labor and low-cost production due to poor regulations; protectionism applies pressure to improve these conditions.”

Question 11

“What are the commonly used forms of trade protectionism?”

Answer 11

“The commonly used forms include tariffs, subsidies, quotas, and administrative barriers.”

Question 12

“What is a tariff?”

Answer 12

“A tariff is a tax on imported goods/services (customs duty).”

Question 13

“What effect do tariffs have on domestic producers?”

Answer 13

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

Question 14

“What happens to the price of imports when a tariff is imposed?”

Answer 14

“When a tariff is imposed, the price of imports increases, reducing the quantity of imports.”

Question 15

“What is a quota?”

Answer 15

“A quota is a physical limit on the amount of imports allowed.”

Question 16

“What is the impact of quotas on market prices?”

Answer 16

“Quotas typically raise market prices by limiting cheaper imports, potentially creating shortages.”

Question 17

“What is a subsidy?”

Answer 17

Government funding

“A subsidy lowers the cost of production for domestic firms, allowing them to increase output and lower prices.”

Question 18

“What effect do subsidies have on domestic producers?”

Answer 18

lower production costs and, consequently, prices, making their goods more competitive in domestic and international markets.

Question 19

“What are non-tariff barriers?”

Answer 19

“Non-tariff barriers include regulations that restrict imports without direct taxes, such as health and safety standards.”

Question 20

“What is one example of a non-tariff barrier?”

Answer 20

“An example is health regulations that effectively block imports based on specific safety standards.”

Question 21

“What are the impacts of protectionist policies on consumers and the government?”

Answer 21

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

Question 22

“What happens to domestic producers after a tariff is imposed?”

Answer 22

“Domestic producers increase output and revenue after a tariff is imposed.”

Question 23

“What happens to consumers when tariffs are imposed?”

Answer 23

“Consumers face higher prices and reduced choices due to tariffs.”

Question 24

“What tax revenue does the government receive from tariffs?”

Answer 24

“The government receives tax revenue based on the difference in price from tariffs imposed.”

Question 25

“What are the effects of tariffs on standards of living?”

Answer 25

“Standards of living for consumers may worsen as their purchasing power declines with higher prices.”

Question 26

“What impact do tariffs have on equality?”

Answer 26

“Equality may improve for workers in protected industries but worsen for foreign firms affected by restrictions.”

Question 27

“What are the impacts of quotas, subsidies, and non-tariff barriers on domestic producers?”

Answer 27

“Quotas increase output for domestic producers, raising prices and revenues.”

Question 28

“What impact do quotas have on foreign producers?”

Answer 28

“Quotas decrease output for foreign producers and can lead to higher prices for consumers.”

Question 29

“What are the effects of subsidies on consumers?”

Answer 29

“Subsidies can lower prices for consumers but may reduce choice and variety in the market.”

Question 30

“What are the government implications of subsidies?”

Answer 30

“Subsidies cost the government money, creating opportunity costs associated with the support provided.”

Question 31

“What is the impact of non-tariff barriers on standards of living?”

Answer 31

“Non-tariff barriers may reduce standards of living due to higher prices and limited choices.”

Question 32

“What is the effect of non-tariff barriers on equality?”

Answer 32

“Non-tariff barriers can help create equality by ensuring fair production standards and costs.”