TRADE - TARIFFS+protectionistpolicies

Question 1

What is a tariff

Answer 1

tax on imports

Question 2

anytime a tax is imposed on markets what happens to supply curve

Answer 2

shifts to the left /upwards

Question 3

in a tariff what is the tax on

Answer 3

imports

Question 4

why is supply curve perfectly elastic in the World Supply

Answer 4

?

Question 5

before we impose tariff there is an x demand

what ussually would have happened and why doesnt it happen

Answer 5

excess

to ration it price would rise but because world suppliers have price of PW price doesnt

the eexcess d = imports

Question 6

in a tariff because the tax is on imports whihc supply curve does it affect

Answer 6

supply of the world curve

shifting it upwards

to sw + tariff

Question 7

draw tariff curve

Answer 7

x axis - quanitty

y axis - price

SD going upwards

DD going down

draw SW curve line - label as PW on price axis

draw q1 for domestic supply

draw q2 for domestic demand

shift sw curve upwards - note it as PW + tariff and SW + tariff

draw domestic supply now at q3 (up to sw+tariff)

draw domestic demand at q4 ( up to sw + tariff)

price = pw+ tariff

Question 8

what does the distance between teh 2 supply curves represent

Answer 8

value of the tariff

Question 9

the tax has raised the

Answer 9

price in the mkt to pw+ tariff

Question 10

explain what happens to domestic supply as a result of the tariff

Answer 10

increases and extends from q1- q3

thers an extension of supply with this high pricce

as producers are incentivised to increase Q to get eh higher price

Question 11

explain what happens to domestic demand as a result of the tariff

Answer 11

decreased and contracted from q2 to q4

as having a higher price e menas consumers are less willing and able to buy products

resulting in demand contracting up the d curve

Question 12

we’ve got an extension in the x curve so we move mm

Answer 12

supply curve

so we move up the supply curve

Question 13

why do we move up the d curve

Answer 13

we’ve got a contraction in D

Question 14

explain the impact on imports as aresult of tariffs

Answer 14

excess demand remains but much s aller than before

q3-q4 much smaller than q1-q

imports have been squeexed due to tariffs because domestic demand has contracted and ds has extended

Question 15

identify the tarrif revenue for hte gov to colelct and any extra info i should know

Answer 15

big rectangel in the middle q3-q4

its the value of tariff and charfed on every import entering the country

Question 16

wjere is the deadweight loss of consuemr surplus

and explain dwl of consumer surplus

Answer 16

triangle to the right of tax revenue

= bit not recovered

Question 17

where is the dwl of world efficiency

Answer 17

traingle to the right of tax revenue

Question 18

explain why theres a dwl of worl efficienyc

Answer 18

units previosuly supplied by effieicny world suppliers w comparative advantage

now produced by suppliers who produce more due to artificial advatage

so supply less units even though less effiicient

Question 19

in terms of dwl of wolrd efficicieny supply urves alos rep the

Answer 19

MC of production

Question 20

explain the argument of world efficiency trhough tariffs through MC

Answer 20

UNITS after Q1 MC for SW constant

MC for DS increases after Q1 so less efiicent than suppliers at , which is true up to Q3

EVERY UNIT AFTER Q3 produced at more cost when SD producing

reosurces are provided to ineffficient producers as opposed to SW

Question 21

How can we tell infnat industry benefit is present

Answer 21

allows them to grow as DS incfreased from Q1 -Q3

so further growth and beenfit from EOS

Question 22

How can we tell the dumping problem solved

Answer 22

price of imports have inreased

this offsets the artificial price reduction

Question 23

how can we tell domestic employment is protected

Answer 23

increase of SD from q1-q3 requiring increase of workers to meet new supply needs

at worst you keep same labour force

Question 24

how do we protect against low labour cost advantages abroa

Answer 24

weve reduced imports

squeezedq3 -q4

PRICE OF IMPORTS increased

iffseting adv of low cost labout as COP increased

Question 25

how has CA position been imporved and how has tax rev been improoed

Answer 25

increase tax rev shown by box

imports squeezed so less expenditure whihc improves CA position
- may lead to a CA surplus

Question 26

what is a quota

Answer 26

quanitity limit placed on number of imports coming into a country

Question 27

what is an export subsidy

Answer 27

gov provides subsidies for firm that produce epxports

lower price - passed onto consumer - easier for producer to copete and export more easily

Question 28

whats the impact of quota

Answer 28

w higher prices as a reuslt of excess demad

SD increases

and DD contracts

Question 29

any ime thers an increase in rpice there is a

Answer 29

DWL consuemr surplus

Question 30

what is the risk of subsidies in terms of domestic producers

Answer 30

Evaluation: Risk of a dependency culture emerging –

i.e. businesses relying on the subsidies rather than taking their own steps to become more competitive

by increasing productivity, eliminating inefficiency and accelerating the pace of process/product innovation

Question 31

whats the effect of subsiides on consuemrs -vley

Answer 31

face higher taxes if expensive subsidies take up a high percentage of government spending

Question 32

negatoves of subsdisies on gov

Answer 32

does not generate tax revenues directly.
Increased spending on subsidies may cause a growing budget deficit