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Chapter 21: Q 48. (page 523)

Why might a tax on domestic consumption of

resources critical for national security be a more

efficient approach than barriers to imports?

Short Answer

Expert verified

Domestic tax reduces the wastage of goods.

Step by step solution

01

Step 1. Definition

Tax is defined as the contributions by individuals and corporations to a government, by which the government finances activities for people like Medicare, social security, etc.

02

Step 2. Explanation

When a government taxes on domestic consumption it preserves the availability of wealth for national security purposes, it also reduces the inefficient use of resources and the country can operate in an effective and useful manner.

Because of this when the supply of imports is reduced due to tariffs on the import of goods and services the country can produce the effective level of output by the given resources.

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Most popular questions from this chapter

Why might the unsafe consumer products argument be a more effective strategy (from the perspective of the importing country) than using tariffs or quotas to restrict imports?

Name and define three policy tools for enacting

protectionism.

How does competition, whether domestic or foreign, harm businesses?

Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.

The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table 21.6 and Table 21.7.

a. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell?

b. What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell?

c. Sketch two supply and demand diagrams, one for each country, in the situation before trade.

d. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade.

e. If the Land of Submarines imposes an antidumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country.

f. Does your general answer change if the Land of Submarines imposes an import quota of 70?
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