Week 3 quiz bshs 305

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Week 3 quiz bshs 305

In the post-World War II era, Nontariff trade barriers have decreased in importance relative to tariff barriers. An import quota is a physical restriction on the quantity of goods that may be imported during a specified time period.

Week 3 quiz bshs 305

Today most industrial countries protect their industries via global import quotas rather than selective import quotas.

A global import quota permits a specified number of goods to be imported each year, but does not specify where the product is shipped from and who is permitted to import.

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Import tariffs and import quotas yield identical protection effects, consumption effects, redistribution effects, and revenue effects. Import quotas can yield revenue for the domestic government if it auctions import licenses to the highest bidder in a competitive market.

To Week 3 quiz bshs 305 extent that domestic importing companies organize as a monopoly buyer, and foreign exporting companies behave as competitive sellers, the importing companies capture the revenue effect of a quota.

An import quota tends to reduce the overall welfare of the importing nation by an amount equal to the protective effect, consumption effect, and the portion of the revenue effect that is captured by the domestic government. The sugar import quotas of the U.

Bshs Week 2 Quiz

During periods of growing demand, a tariff more effectively restricts the volume of imports than an equivalent import quota.

With a quota placed on imported sugar, increased domestic demand leads to increased sugar imports but not to higher sugar prices. With a tariff on auto imports, increased domestic demand leads to a fall in the number of autos imported and a rise in the number of autos produced domestically.

An orderly marketing agreement is a market-sharing pact negotiated by trading nations, and its effect is to moderate the intensity of international competition. An elimination of nontariff barriers on apples tends to increase apple imports, reduce profits of import-competing apple producers, and generate job losses for domestic apple workers.

The distribution of an import quota's revenue effect depends on the relative concentration of bargaining power between foreign exporters and domestic importers. Voluntary export restraint agreements typically apply to all of the world's exporting nations rather than only the most important exporting nations.

For an export quota applied to manufactured goods, foreign exporters tend to capture only a negligible share of the quota's revenue effect. When increases in nonrestraint supply offset part of the cutback in shipments that occur under an export quota, the overall inefficiency loss for the importing country is less than that which would have occurred in the absence of nonrestrained exports.

Export quotas, placed on Japanese auto shipments to the United States in the s, led to rising prices of both Japanese autos and U. During the s, U. By limiting the amount of foreign sourcing, local content laws are viewed as a means of jobs preservation for domestic workers.

Local content laws stipulate the maximum percentage of a product's total value that must be produced domestically for that product to be sold domestically. Local content laws are consistent with the principle of import substitution, in which domestic production replaces the importation of goods from abroad.

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To the extent that a local content requirement forces firms to locate production in a high-cost nation, product price rises and consumer surplus falls. A subsidy granted to import-competing producers results in a welfare loss to the economy by an amount equal to the protective effect plus the consumption effect.

A subsidy granted to import-competing producers is intended to lead to increased domestic production and decreased imports for the home country. A subsidy granted to an import-competing producer shifts its supply schedule outward to the right.

A subsidy granted to an import-competing producer imposes a deadweight loss on the domestic economy equal to the redistribution effect plus consumption effect.

A subsidy granted to import-competing producers reduces overall domestic welfare by the same amount as would a tariff or quota that restricts imports by the same amount.

Week 3 quiz bshs 305

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