1. If you were an import-competing producer in a growing market, which trade ins
ID: 1181488 • Letter: 1
Question
1.If you were an import-competing producer in a growing market, which trade instrument would you prefer
If you were an import-competing producer in a growing market, which trade instrument would you prefer-a tariff, an import quota, or a subsidy? Why? How does an import quota differ from a tariff? Can the government ever capture the quota rent? How? What is the difference between an export tax and an export subsidy? Which instrument are domestic consumers likely to prefer? Why? Why might the use of a tariff to decrease aggregate unemployment in a country eventually generate an increase in aggregate unemployment in that country? You have learned that a subsidy is preferable to a tariff if the objective is to generate a given amount of employment in an individual industry. Explain this point in language understandable to someone untrained in economics.Explanation / Answer
1.A tariff and a quota will have the same effect.It will cause the consumer price to increase,called economic rent. In case of tariff, the government will have more tax revenue,compared to the case of quota which the money will go to the pocket of importer. Subsidy will not affect the market. Producers just have money and do anything they want. The government will loose tax money. And the society will get more unsold products.The baby has more headache than the mother.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.