Protectionism

Question 1

Define protectionism

Answer 1

Occurs when governments intervene in international trade in order to protect their domestic markets

Question 2

What are the advantages of tariffs

Answer 2

Help protect jobs in key sectors that may be declining Increase domestic market share —> imports are higher Less withdrawals so more money flows within the economy Prevents dumping by subsidised overseas firms Protects infant industries

Question 3

What are disadvantages of tariffs

Answer 3

Firms relying on imported components may face rising costs —> lose jobs Risk of retaliation —> job losses in export sectors Causes cost-push inflation Loss of consumer surplus Depends on PED of imports in other countries

Question 4

What is the diagram for tariffs

Answer 4

Left black triangle shows part of the producers revenue necessary to cover the higher costs faced by domestic firms

Length from Pw and Pt shows and the area between represents a loss of consumer surplus

Question 5

Define quota

Answer 5

Limit on the quantity of a particular import that is allowed into the country within a period of time