Effects of Quotas vs Tariffs on Market Power

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What is the purpose of implementing import tariffs?

To protect domestic industries (correct)

To increase consumer prices

To decrease government revenue

To encourage imports

Which term describes a tariff that is applied as a percentage of the price of the imported good?

Specific tariff

Export tax

Quota

Ad-valorem tariff (correct)

What is the role of export taxes in trade policy?

To reduce government revenue

To discourage exports (correct)

To promote exports

To lower consumer prices

Which trade policy instrument is specifically designed to counteract unfair pricing practices by foreign producers?

Antidumping duty Signup and view all the answers

How are most countries' import tariffs regulated in the World Trade Organization (WTO)?

They are bound Signup and view all the answers

What is the primary effect of imposing import tariffs on consumer prices?

Increase in consumer prices Signup and view all the answers

In the context of trade policy instruments, what are 'non-tariff barriers' (NTBs)?

Regulations that restrict trade without using tariffs Signup and view all the answers

'Countervailing duties' are specifically meant to address what issue in trade?

Unfair government subsidies for foreign producers Signup and view all the answers

'Local content requirements' are an example of which type of trade policy instrument?

'Non-tariff barriers' Signup and view all the answers

What is the significance of 'Welfare Function' in the context of trade policies?

It represents the overall well-being of the economy. Signup and view all the answers

What does the change in welfare depend on?

The type of competition Signup and view all the answers

Why does a small country in a perfect competition setting have an optimal tariff of zero?

Because it has no control over world prices Signup and view all the answers

What is the main purpose of a Voluntary Export Restraint (VER)?

To manage trade imbalances Signup and view all the answers

How do quotas compare to tariffs in a perfect competition market?

Both quotas and tariffs have similar economic effects Signup and view all the answers

What is the impact of import quotas efficiently auctioned by the government?

Reduction in losses from quotas Signup and view all the answers

Why did developed countries impose quotas on developing country exports of textiles and apparel between 1974 and 2004?

To protect their domestic industries Signup and view all the answers

In what scenario would a small importing country have a greater impact from a tariff?

When facing low import demand elasticity Signup and view all the answers

'C(y)' represents the cost of producing good 'y'. What does 'C'(y) signify?

'C(y)' at the marginal output level Signup and view all the answers

'Imports are m = d(p) - y'. What does 'y' represent in this equation?

'y' is the quantity of goods produced domestically Signup and view all the answers

What is the role of 'tm' in the context of social welfare?

To measure consumer gains from tariff revenues Signup and view all the answers

Why does world welfare go down when the imposing country is small?

The actions of a small country do not influence world prices. Signup and view all the answers

What happens to the affected country when a large country imposes an import tariff?

It experiences a decline in exports. Signup and view all the answers

How does a large country benefit its producers when it provides export subsidies?

By lowering the cost of production for exports. Signup and view all the answers

What impact do trade policies by large economies have on world welfare?

Their impact is nuanced and depends on various factors. Signup and view all the answers

What measures can be classified as Non-Tariff Barriers (NTBs) according to the text?

Local content requirements and product standards Signup and view all the answers

In what scenario would an importing country impose antidumping duties?

When dumping is found to be occurring and causing harm to domestic industry Signup and view all the answers

What may safeguard measures include to protect domestic industries?

Temporary import restrictions like quotas or tariffs Signup and view all the answers

What is the purpose of countervailing duties in international trade?

To counteract the effects of dumping or subsidies on domestic industries Signup and view all the answers

What type of protection can a domestic industry request if facing increased imports causing harm?

Safeguard protection measures such as tariffs or quotas Signup and view all the answers

Which entities were involved in disputes regarding measures prohibiting the import and marketing of seal products as per the text?

Canada, Norway, and the EU Signup and view all the answers

What effect does a quota have on market power compared to a tariff?

A quota increases market power by limiting competition, while a tariff does not directly affect market power. Signup and view all the answers

How does a quota impact domestic prices compared to a tariff?

Domestic prices rise more significantly under a quota due to restricted supply and increased market power. Signup and view all the answers

What happens to the quantity of production by the domestic monopolist under a quota?

The quantity of production is likely to increase as the monopolist can exercise more market power. Signup and view all the answers

In the context of imperfect competition, how does CAP's support mechanisms affect producer surplus?

The degree of impact on producer surplus depends on the competitiveness of the market structure. Signup and view all the answers

Who bears the cost of subsidies provided under strategic trade policy?

The government funding the subsidy. Signup and view all the answers

Why would a country impose export taxes according to WTO rules?

For revenue generation and protection of industries. Signup and view all the answers

What is one reason why Europe became an exporter of agricultural products despite free trade expectations?

'Europe's Common Agricultural Policy' supported price increases for European products. Signup and view all the answers

Under WTO regulations, what is the impact of export subsidies on welfare?

'Export subsidies decrease welfare regardless of country size.' Signup and view all the answers

'Beggar-thy-neighbor' policies are most likely to result in what outcome?

'All countries being worse off.' Signup and view all the answers

Under strategic trade policy, who should receive the subsidy?

The industry facing stiff international competition. Signup and view all the answers