restrictions on free trade

Question 1

reasons for restrictions on free trade

Answer 1

to correct a deficit in the trade in goods and services balance, reduce unemployment, limit monopoly power of global economies, reduce sectoral imbalance, prevent dumping

Question 2

types of restriction on free trade: tariffs

Answer 2

taxes on imported goods, artificially raise the price of an item

Question 3

types of restriction on free trade: quotas

Answer 3

limit on the quantity of a product imported, artificially raises a products price, encourages domestic spending

Question 4

types of restriction on free trade: subsidies to domestic producers

Answer 4

reduce cost of production, so causing the supply curve of domestic products to the right. this method involves public expenditure to finance the subsidies.

Question 5

types of restriction on free trade: non tariff barriers

Answer 5

include: health and safety regulations, environmental regulations, labelling of products etc., may raise the cost of import.

Question 6

impact of protectionist policies: on consumers

Answer 6

higher prices and a reduction in consumer surplus and choice

Question 7

impact of protectionist policies: on producers

Answer 7

domestic firms face less competition and have less incentive to produce at lowest average cost, may cause retaliation by other countries which might impose protectionist measures

Question 8

impact of protectionist policies: on governments

Answer 8

if tariffs are imposed then the government would receive a tax revenue

Question 9

impact of protectionist policies: on living standards

Answer 9

distorts comparative advantage, so specialisation reduced, so lower output