Protectionism

Question 1

Protectionism

Answer 1

The practice of shielding a country’s domestic industries from foreign competition

Question 2

Arguments for protectionism (6)

Answer 2

• Protect domestic industries
• Raise tax
• Improve BOP position
• Developing sunrises industries
• Environment/ MF / political
• Prevent import dumping

Question 3

Import dumping

Answer 3

When firms sell products abroad at below prices in the home market

Question 4

Types of protectionism (6)

Answer 4

• Import tariffs
• Embargo’s
• Quotas
• Subsidies exporters
• Manipulate exchange rate
• Red tape

Question 5

Import tariffs

Answer 5

A tax places by the government on imports

Question 6

Effects of import tariffs (3)

Answer 6

• Increased PL for consumers
• Increase domestic D = increase domestic C
• Increase in tax revenues

Question 7

Quota diagram (5)

Answer 7

Pre-Tariff
0 to Q1 = Domestic P
Q1 to Q2 = Level of M

Post-Tariff
Q1 to Q3 = Domestic P
Q2 to Q4 = Fall in domestic C + M
Q3 to Q4 = Level of M

Question 8

Import Quota

Answer 8

A quantity limit on the volume of imports of a product that can come into a country

Question 9

Import quota effects (2)

Answer 9

• Creates scarcity
• Excess demand = increase in domestic suppliers