Micro/Macro effects of Protectionist Policies

Question 2

Name 3 Micro effects of Protectionist Policies (Tariff Diagram)

Answer 2

1. Higher Prices
2. Lower Quantity
3. Domestic Producer Revenue rising effects
4. Consumer/Producer surplus
5. Allocative inefficiency, firms allowing costs to rise

Question 3

How is consumer surplus effected due to protectionist policy

Answer 3

Consumer surplus is suffered at a deadweight welfare loss due to higher prices, and inefficient firms with lower quality goods back into the market.
Thus gained with a removal of a tariff

Question 4

How is producer surplus effected due to protectionist policy

Answer 4

Producer surplus is gained with a tariff due to domestic producers being let back into the market.
Thus lost without a tariff consequently

Question 5

Name 3 Macro effects of Protectionist policies

Answer 5

1. Gov revenue gained (Tariff diagram)
   2.Inflation (cost-push inflation)
2. Current account balance Could improve (Cetrius paribus exports stay the same imports reduced)
   4.Gowth (Due to (x-m)increasing)
3. Higher employment due to labor being a derived demand, if domestic firms grow.\