The Political Economy of Trade Policy Flashcards
1
Q
What is Rent Seeking?
A
Spending resources (L/K) to gain ownership of scarce quota rents.
(spending money on lobbying form to get the quota)
2
Q
what policy would the terms fo grade argument dictate for export sectors?
A
a negative subsidy! A tax on exports that raises the price of export to foreigners.
= reduce domestic prices + government revenue
3
Q
What is domestic market failure?
A
a situation defined by an inefficient distribution of goods and services in the free market.
4
Q
What is the social optimal cost?
A
P = MSC
MSC = MC - MEB
