it\'s Micro economic Q. Thank you! 1. Who are the winners and who are the losers
ID: 1207173 • Letter: I
Question
it's Micro economic Q.
Thank you!
1. Who are the winners and who are the losers from "free trade"?
2. Why do economists believe that a a tariff is better than an import quota? (Actually most economists do not like either!)
3. Why is the "infant industry" protectionist argument perhaps valid for some situations?
4. What is one arguments for and one argument against NAFTA?
5. Evaluate this statement: "If a country bans an import, smuggling is inevitable. We should welcome smuggling becuse it increases consumer welfare."
6. Suppose Country A can produce 200 toys or 400 pineapples per day, while Country B can produce 300 toys or 900 pineapples per day. Where do the comparative advantatges lie? Should trade take place?
7. What is dumping? Why is this done?
8. Discuss this statement: "Free traders win the economic arguments, but protectionists (those who favor tariffs) often win the elections."
9. Do you believe that American consumers should boycott goods made by exploited workers in Less Developed Countries? Explain why this might or might not work.
Explanation / Answer
(1) Free trade is an economic situation where exports and imports are conducted without any government imposed barriers like import tariff, export duty or quota.
In free trade, in absence of restrictions, price is lower and trade volume is higher, while with trade restrictions like import tariff, price is higher and trade volume is lower.
So, with free trade, consumer surplus is higher, so domestic consumers benefit. Producer surplus is lower, so producers lose. Government doesn't earn any revenue, so they lose. But with import barriers like tariff, consumer surplus is lower, so consumers lose. Producer surplus is higher, so producers gain. Government also gains by getting tariff revenue.
(2) A tariff is better than quota only because in case of a tariff, the government earns tariff revenue while in case of quota, no such revenue is earned. This is why tariff is preferred to quota as a trade barrier.
NOTE: First two questions are answered.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.