• With trade you can produce more of one good and get a higher price for it • Trade in Similar Goods: Why do countries trade in similar goods? The two main reasons are diversity of tastes and economies of scale. Trade Restrictions: Tariffs and Non-tariff restrictions. • Non-Tariff Restrictions: Quotas, licensing, and voluntary export restraint. o Voluntary Export Restraint: A voluntary export restraint works like a quota, except the quota is established by the government of the exporting country, with the consent of the importing country. The government of the exporting country allocates the export quantity and the revenue from the restriction among the producers in the exporting country. The Effects of a Tariff: A tariff on the import of fun from Japan to the USA will: Decrease supply of fun in USA. Increase price of fun in USA. Decrease export of food from USA to Japan. Decrease price of food in USA.
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