Chapter 20: Q. 16 (page 490)
Why would countries promote protectionist laws, while also negotiate for freer trade internationally?
Short Answer
To take benefits of exports but limit imports to protect domestic players.
Chapter 20: Q. 16 (page 490)
Why would countries promote protectionist laws, while also negotiate for freer trade internationally?
To take benefits of exports but limit imports to protect domestic players.
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How would direct subsidies to key industries be preferable to tariffs or quotas?
The country of Pepper land 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.
Price\( | Qd | Qs |
---|---|---|
60 | 230 | 180 |
70 | 200 | 200 |
80 | 170 | 220 |
90 | 150 | 240 |
100 | 140 | 250 |
Table 20.6 Pepper land
Price\) | Qd | Qs |
---|---|---|
60 | 430 | 310 |
70 | 420 | 330 |
80 | 410 | 360 |
90 | 400 | 400 |
100 | 390 | 440 |
Table 20.7 Land of Submarines
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?
In principle, the benefits of international trade to a country exceed the costs, no matter whether the country is importing or exporting. In practice, it is not always possible to compensate the losers in a country, for example, workers who lose their jobs due to foreign imports. In your opinion, does that mean that trade should be inhibited to prevent losses?
Name and define three policy tools for enacting protectionism.
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