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Chapter 33: Q.27 (page 804)

Why might a low-income country put up barriers to trade, such as tariffs on imports?

Short Answer

Expert verified

To protect domestic industries.

Step by step solution

01

Step 1. Definition

Trade barriers refer to the restrictions imposed by the government on the inflow of trade in the economy. Tariffs, quotas, and standards are some examples of trade barriers.

02

Step 2. Explanation 

The inflow of trade introduces competition in the market. Consumers are benefited from lower profits and greater variety in the market. However, trade can also be harmful as some industries might not be able to survive foreign competition. If such firms are driven out of the market it may lead to job loss.

So, low-income countries impose trade barriers to protect infant industries from foreign competition.

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Most popular questions from this chapter

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.

Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?

You just got a job in Washington, D.C. You move into an apartment with some acquaintances. All your roommates, however, are slackers and do not clean up after themselves. You, on the other hand, can clean faster than each of them. You determine that you are 70% faster at dishes and 10% faster with vacuuming. All of these tasks have to be done daily. Which jobs should you assign to your roommates to get the most free time overall? Assume you have the same number of hours to devote to cleaning. Now, since you are faster, you seem to get done quicker than your roommate. What sorts of problems may this create? Can you imagine a trade-related analogy to this problem?

From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-industry trade.

In Exercise 33.31, is there an “ask” where Venezuelans may say “no thank you” to trading with Canada?
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